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Full text of "North Carolina Register v.6 no. 15 (11/1/1991)"

K Fd /"^ SM / > V^ V c ' 15] «M " ; 



The 
L NORTH CAROLINA 

REGISTER 



IN THIS ISSUE 



^iORT/Tg 



ft. 



91 



tutu 

ITIONJ 



EXECUTIVE ORDERS 

PROPOSED RULES 

Cosmetic Art Examiners 

Economic and Community Development 

Environment, Health, and Natural Resources 

Human Resources 

Insurance 

Optometry, Bd. of Examiners 

Safety and Health Review Bd. of NC 

State Personnel 

LIST OF RULES CODIFIED 

RRC OBJECTIONS 

RULES INVALIDATED BY JUDICIAL DECISION 



CEIVED 



ISSUE DATE: NOVEMBER 1, 1991 
Volume 6 • Issue 15 • Pages 981-1107 



INFORMATION ABOUT THE NORTH CAROLINA REGISTER AND ADMINISTRATIVE CODE 



NORTH CAROLINA REGISTER 

The North Carolina Register is published bi-monthly 
and contains information relating to agency, executive, 
legislative and judicial actions required by or affecting 
Chapter 150B of the General Statutes. All proposed, ad- 
ministrative rules and amendments filed under Chapter 
150B must be published in the Register. The Register 
will typically comprise approximately fifty pages per 
issue of legal text. 

State law requires that a copy of each issue be pro- 
vided free of charge to each county in the state and to 
various state officials and institutions. The North Carolina 
Register is available by yearly subscription at a cost of 
one hundred and five dollars ($105.00) for 24 issues. 

Requests for subscriptions to the North Carolina 
Register should be directed to the Office of Ad- 
ministrative Hearings, P. O. Drawer 27447, Raleigh, N. 
C. 27611-7447, Attn: Subscriptions. 

ADOPTION, AMENDMENT, AND REPEAL OF 
RULES 

An agency intending to adopt, amend, or repeal a rule 
must first publish notice of the proposed action in the 
North Carolina Register. The notice must include the 
time and place of the public hearing; a statement of how 
public comments may be submitted to the agency either 
at the hearing or otherwise; the text of the proposed 
rule or amendment; a reference to the Statutory 
Authority for the action and the proposed effective date. 

The Director of the Office of Administrative Hearings 
has authority to publish a summary, rather than the 
full text, of any amendment which is considered to be 
too lengthy. In such case, the full text of the rule con- 
taining the proposed amendment will be available for 
public inspection at the Rules Division of the Office of 
Administrative Hearings and at the office of the pro- 
mulgating agency. 

Unless a specific statute provides otherwise, at least 
30 days must elapse following publication of the pro- 
posal in the North Carolina Register before the agency 
may conduct the required public hearing and take ac- 
tion on the proposed adoption, amendment or repeal. 

When final action is taken, the promulgating agency 
must file any adopted or amended rule for approval by 
the Administrative Rules Review Commission. Upon ap- 
proval of ARRC, the adopted or amended rule must be 
filed with the Office of Administrative Hearings. If it 
differs substantially from the proposed form published 
as part of the public notice, upon request by the agen- 
cy, the adopted version will again be published in the 
North Carolina Register. 

A rule, or amended rule cannot become effective 
earlier than the first day of the second calendar month 
after the adoption is filed with the Office of Ad- 
ministrative Hearings for publication in the NCAC. 

Proposed action on rules may be withdrawn by the 
promulgating agency at any time before final action is 
taken by the agency. 

TEMPORARY RULES 

Under certain conditions of an emergency nature, 
some agencies may issue temporary' rules. A temporary 
rule becomes effective when adopted and remains in 



effect for the period specified in the rule or 180 daj 
whichever is less. An agency adopting a temporary ru 
must begin normal rule-making procedures on the pj 
manent rule at the same time the temporary rule 
adopted. 

NORTH CAROLINA ADMINISTRATIVE CODE 

The North Carolina Administrative Code (NCAC) 
a compilation and index of the administrative rules 
25 state agencies and 38 occupational licensing boan 
The NCAC comprises approximately 15,000 letter si; 
single spaced pages of material of which approxima 
ly 35% is changed annually. Compilation and public 
tion of the NCAC is mandated by G.S. 150B-63(b). 

The Code is divided into Titles and Chapters. Ea 
state agency is assigned a separate title which is fi 
ther broken down by chapters. Title 21 is designat 
for occupational licensing boards. 

The NCAC is available in two formats. 

(1) Single pages may be obtained at a minimi, 
cost of two dollars and 50 cents ($2.50) for 
pages or less, plus fifteen cents ($0.15)perea 
additional page. 

(2) The full publication consists of 53 volum 
totaling in excess of 15,000 pages. It is si 
plemented monthly with replacement pages 
one year subscription to the full publication 
eluding supplements can be purchased ) 
seven hundred and fifty dollars ($750.00). 
dividual volumes may also be purchased w 
supplement service. Renewal subscriptions : 
supplements to the initial publication availal 

Requests for pages of rules or volumes of the NC 
should be directed to the Office of Administrat 
Hearings. 

NOTE 

The foregoing is a generalized statement of the p 
cedures to be followed. For specific statutory langua 
it is suggested that Articles 2 and 5 of Chapter 150B 
the General Statutes be examined carefully. 

CITATION TO THE NORTH CAROLINA 
REGISTER 

The North Carolina Register is cited by volume, iss 
page number and date. 1:1 NCR 101-201, April 1, 1! 

refers to Volume 1, Issue 1, pages 101 through 201 
the North Carolina Register issued on April 1, 198 



North Carolina Register. Published bi-monthly by the 
Office of Administrative Hearings, P.O. Drawer 27447 
Raleigh, North Carolina 27611-7447, pursuant tc 
Chapter 150B of the General Statutes. Subscription; 
one hundred and five dollars ($105.00) per year. 

North Carolina Administrative Code. Published ir 
looseleaf notebooks with supplement service by th< 
Office of Administrative Hearings, P.O. Drawer 27447 
Raleigh, North Carolina 27611-7447, pursuant tc 
Chapter 150B of the General Satutes. Subscription: 
seven hundred and fifty dollars ($750.00). Individua 
volumes available. 



NORTH 
CAROLINA 
REGISTER 



ISSUE CONTENTS 




Office of Administrative Hearings 

P. O. Drawer 27447 

Ralegh, NC 27611-7447 

(919) 733 - 2678 



Julian Mann III, 

Director 
James R. Scarcella St., 

Deputy Director 
Molly Masich, 

Director APA Services 



Staff: 

Ruby Creech, 

Publications Coordinator 
Teresa Kilpatrick, 

Editorial Assistant 
Jean Shirley, 

Editorial Assistant 



I. EXECUTIVE ORDERS 

Executive Orders 153-156 981 



II. PROPOSED RULES 

Economic and Community 
Development 

Savings Institutions 

Division 984 

Environment, Health, and 
Natural Resources 

Environmental Management .... 1 06 1 
Wildlife Resources 
Commission 1062 

Human Resources 

Facility Services 1035 

Medical Assistance 1036 

Social Services 1039 

Independent Agencies 
Safety and Health Review 
Board of North Carolina 1069 

Insurance 

Actuarial Services Division 1060 

Agent Services Division 1056 

Licensing Boards 

Cosmetic Art Examiners 1066 

Optometry, Bd of Examiners... 1068 

State Personnel 
Office of State Personnel 1082 

III. LIST OF RULES CODIFIED 1087 

IV. RRC OBJECTIONS 1098 

V. RULES LNVALIDATED BY 

JUDICIAL DECISION 1103 

VI. CUMULATDE INDEX 1105 



NORTH CAROLINA REGISTER 

Publication Schedule 

(October 1991 - December 1992) 



Issue 


Last Day 


Last Day 


Earliest 


Earliest 


Last Day 


♦ 


Date 


for 


for 


Date for 


Date for 


to 


Earliest 




Filing 


Electronic 


Public 


Adoption 


Submit 


Effective 






Filing 


Hearing 


by 
Agency 


to 
RRC 


Date 


+**********+♦++*+**+*+++*+**♦+*+****+**+***+***+*++++++*♦+**+++**++ 


10/15/91 


09/24/91 


10/01/91 


10/30/91 


11/14/91 


11/20/91 


01/02/92 


11/01/91 


10/11/91 


10/18/91 


11/16/91 


12/01/91 


12/20/91 


02/03/92 


11/15/91 


10/24/91 


10/31/91 


11/30/91 


12/15/91 


12/20/91 


02/03/92 


12/02/91 


11/07/91 


11/14/91 


12/17/91 


01/01/92 


01/20/92 


03/02/92 


12/16/91 


11/21/91 


12/02/91 


12/31/91 


01/15/92 


01/20/92 


03/02/92 


01/02/92 


12/09/91 


12/16/91 


01T7/92 


01/31/92 


02/20/92 


04/01/92 


01/15/92 


12/20/91 


12/31/91 


01/30/92 


02/14/92 


02/20/92 


04/01/92 


02/03/92 


01/10/92 


01/17/92 


02/18/92 


03/04/92 


03/20/92 


05/01/92 


02/14/92 


01/24/92 


01/31/92 


02/29/92 


03/15/92 


03/20/92 


05/01/92 


03/02/92 


02/10/92 


02/17/92 


03/17/92 


04/01/92 


04/20/92 


06/01/92 


03/16/92 


02/24 92 


03/02/92 


03/31/92 


04/15/92 


04/20/92 


06/01/92 


04/01/92 


03/11/92 


03/18/92 


04/16/92 


05/01/92 


05/20/92 


07/01/92 


04/15/92 


03/25/92 


04/01/92 


04/30 92 


05/15/92 


05/20/92 


07/01/92 


05/01/92 


04/10/92 


04/17/92 


05/16/92 


05/31/92 


06'20/92 


08/03/92 


05/15/92 


04/24/92 


05/01/92 


05/30.92 


06/14/92 


06/20/92 


08/03/92 


06/01/92 


05/11/92 


05/18/92 


06/16/92 


07/01/92 


07/20/92 


09/01/92 


06/15/92 


05/25/92 


06/01/92 


06/30/92 


07/15/92 


07/20/92 


09/01/92 


07/01/92 


06/10/92 


06/17/92 


07/16/92 


07/31/92 


08/20/92 


10/01/92 


07/15/92 


06/24/92 


07/01/92 


07/30/92 


08/14/92 


08/20/92 


10/01/92 


08/03/92 


07/13.92 


07/20/92 


0818/92 


09/02/92 


09 '20/92 


11/02/92 


08/14/92 


0724/92 


07/3192 


08/29 92 


09/13/92 


09/20/92 


11/02/92 


09/01/92 


08 11 92 


08/18/92 


09/1692 


10/01/92 


10/20/92 


12/01/92 


09/15/92 


08/25/92 


09/01/92 


09/30/92 


10/15/92 


10 20/92 


12/01/92 


10/01/92 


09,10/92 


09/17/92 


10/16.92 


10/31/92 


11/20/92 


01/04/93 


10/15/92 


09/24/92 


10/01/92 


10 30 92 


11/14/92 


1L20/92 


01/04/93 


1 1 02 92 


10/12/92 


10/19/92 


11/17/92 


12/02/92 


12/20/92 


02/01/93 


11/16/92 


10 23/92 


10/30/92 


12/01/92 


12/16/92 


12/20/92 


02/01/93 


12 01 92 


11/06 92 


11/13/92 


12/16 92 


12/31/92 


01/20/93 


03/01/93 


12/15/92 


11/24/92 


12/01/92 


12/30/92 


01/14/93 


01/20/93 


03/01/93 



* The "Earliest Effective Date" is computed assuming that the agency follows 
the publication schedule above, that the Rules Review Commission approves the 
rule at the next calendar month meeting after submission, and that RRC delivers 
the rule to the Codifier of Rules five (5 J business days before the 1st business 
day of the next calendar month. 



EXECUTIVE ORDERS 



EXECUTIVE ORDER NUMBER 153 
NORTH CAROLINA 2000 

WHEREAS, President Bush and the nation's 
governors have called upon every community in 
America to achieve the following national edu- 
cation goals: 

(1) By the year 2000, all children in America 
will state school ready to learn; 

(2) By the year 2000, the high school gradu- 
ation rate will increase to at least 90 percent; 

(3) By the year 2000, American students will 
leave grades four, eight, and twelve having 
demonstrated competency over challenging 
subject matter including English, math- 
ematics, science, history, and geography; and 
every school in America will ensure that all 
students learn to use their minds well, so 
they may be prepared for responsible citi- 
zenship, further learning, and productive 
employment in our modem economy; 

(4) By the year 2000, U.S. students will be first 
in the world in mathematics and science 
achievement; 

(5) by the year 2000, every adult American will 
be literate and will possess the knowledge 
and skills necessary to compete in a global 
economy and exercise the rights and re- 
sponsibilities of citizenship; and 

(6) By the year 2000, every school in America 
will be free of drugs and violence and will 
offer a disciplined environment conducive to 
learning; and 

WHEREAS, American 2000, President Bush's 
strategy for education builds upon four related 
themes, to wit: 

(1) Creating better and more accountable 
schools; 

(2) Creating a new generation of American 
schools for tomorrow's students; 

(3) Transforming American into a "Nation of 
Students"; and 

(4) Making our communities places where 
learning will happen; 

NOW THEREFORE, by the authority vested 
in me as Governor by the Constitution and laws 
of North Carolina, IT IS ORDERED: 

Section 1. ESTABLISHMENT. There is 
hereby established the North Carolina 2000 
Steering Committee. 

Section 2. MEMBERSHIP. The Governor 
shall appoint members of the Committee who 
shall serve at the pleasure of the Governor. The 
membership of the committee shall include rep- 



resentatives from the following: The education 
community, business and industry, and govern- 
ment as well as parents of North Carolina stu- 
dents. 

Section 3. TERMS. All members shall serve 
at the pleasure of the Governor. 

Section 4. CHAIRPERSON. The Governor 
shall appoint a chairperson. 

Section 5. MEETINGS. The Committee shall 
meet bi-monthly. 

Section 6. QUORUM. A majority of the 
membership shall constitute a quorum. 

Section 7. PURPOSE. The purpose of the 
Committee shall be to: 

(1) Officially adopt the national education 
goals; 

(2) Establish a strategy for challenging local 
communities to develop community action 
teams; 

(3) Develop state-wide capability to dissem- 
inate information regarding the strategies 
and activities developed by local goal teams; 
and 

(4) Develop and implement a reporting system 
to assimilate information regarding progress 
through an annual state-wide report. 

Section 8. DUTIES AND POWERS. The 
Committee shall perform such duties as assigned 
by the Governor which shall include, but not be 
limited to, the following: 

a. To develop an action plan for making the 

achievement of the national education 
goals a State priority; and 

b. To provide statewide vision and leadership 

to mobilize public attention and support 
to enable communities to: develop local 
action plans to meet goals, disseminate 
information regarding plans and pro- 
grams, to evaluate results, and to seek 
funding for a "New American School" 
from the U.S. Department of Education. 

Section 9. ADMINISTRATION AND 

EXPENSES. The administrative 
support for the Committee shall be provided by 
the Office of the Governor. 

Section 10. SEMI-ANNUAL REPORT. The 

Committee shall report semi-annually from the 
date of this Executive Order to the Governor re- 
garding the progress of North Carolina 2000. 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



981 



EXECUTIVE ORDERS 



This Executive Order is effective immediately 
and shall remain in effect until June 30, 1993, 
unless terminated earlier or extended by further 
Executive Order. 

Done in Raleigh, North Carolina, this the 24th 
day of September, 1991. 

EXECUTIVE ORDER NUMBER 154 

AMENDING EXECUTIVE ORDER NUMBER 53 

THE GOVERNORS INTER -AGENCY ADVISORY 

TEAM ON ALCOHOL AND OTHER DRUG 

ABUSE 



EXECUTIVE ORDER NUMBER 156 

ESTABLISHING THE NORTH CAROLINA 

COMMITTEE ON LITERACY AND BASIC 

SKILLS AND RESCINDING 

EXECUTIVE ORDER NUMBER 90 

WHEREAS, the Governor's Advisory Council 
on Literacy was created by Executive Order 
Number 90 on May 18, 1989, with the purpose 
of providing advocacy for adult literacy in North 
Carolina and advising the Governor on improv- 
ing the literacy of the State's citizens; and 



By the authority vested in me as Governor by 
the Constitution and laws of North Carolina, IT 
IS ORDERED: 

Executive Order Number 53, as amended by 
Executive Order Number 85 and as amended and 
extended by Executive Order Number 144, is 
hereby amended to add the following member to 
the Advisory Team. 

Section 1. Establishment 
The Advisory Team shall consist of not less 
than twelve members and shall include the fol- 
lowing... 

A member from the North Carolina 
Commission on Indian Affairs. 

This Executive Order shall become effective 
immediately. 

Done in Raleigh, this the 30th day of Septem- 
ber, 1991. 

EXECUTIVE ORDER NUMBER 155 
AMENDING EXECUTIVE ORDER NUMBER 65 
NORTH CAROLINA STATE DEFENSE MILITIA 

By the authority vested in me as Governor by 
the Constitution and laws of North Carolina, IT 
IS ORDERED: 

Executive Order Number 65 is hereby amended 
to add the following language at the end of the 
fourth "WHEREAS" clause: "or when other- 
wise called upon by the Governor"; and is also 
amended to add the following language to the 
end of Section 1: "and, when otherwise called 
upon by the Governor." 

This Executive Order shall become effective 
immediately. 

Done in Raleigh, this the 17th day of October, 
1991. 



WHEREAS, the Advisory Council has accom- 
plished its primary mandates by focusing its at- 
tention on the expansion of Family Literacy 
programs, expansion of workplace literacy, and 
the establishment of a private, non-profit trust 
fund for the support of literacy programs; and 

WHEREAS, there is a need for a continuing 
mechanism for public advocacy and guidance of 
public policy in adult literacy which is more 
closely linked to the State Board of Community 
Colleges, the State's primary governing board for 
the delivery of adult basic education; 

THEREFORE, by the authority vested in me 
as Governor by the Constitution and laws of 
North Carolina, IT IS ORDERED: 

Section 1. ESTABLISHMENT 

The North Carolina Committee for Basic Skills 
is established to: 

a. Advise the Governor, the State Board of 
Community Colleges, and other public pol- 
icy and education leaders on issues and 
needs in basic skills education for adults; 

b. Foster cooperation between the public and 
private sectors in meeting the critical need 
for higher basic skills in the workplace; 

c. Expand public awareness of the need for a 
literate citizenry. 

Section 2. MEMBERSHIP 

a. The Committee membership shall consist 
of 13 members to be appointed by the 
Governor and who serve at his pleasure. 
The Governor shall select a chairperson 
from among the members. 

b. The Committee shall include representation 
from the following groups: education, job 
training, human services, public assistance, 
libraries, economic development, and class- 
room literacy teachers. 

c. Members of the Committee shall serve terms 
from July 1, 1991, to December 31, 1992. 



982 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



EXECUTIVE ORDERS 



d. The membership may be supplemented as ORDER NUMBER 90 

deemed appropriate by the Chairman of the The Governor's Advisory Council on Literacy 

State Board of Community Colleges. is dissolved with gratitude to the membership for 

the significant work accomplished. 
Section 3. ADMINISTRATIVE SUPPORT 

The North Carolina State Board of Community This Executive Order shall become effective 

Colleges and the Department of Community immediately. 
Colleges shall provide administrative support to 

the Committee. Done in Raleigh, North Carolina, this the 17th 

day of October, 1991. 
Section 4. RESCISSION OF EXECUTIVE 



6:15 NORTH CAROLINA REGISTER November I, 1991 983 



PROPOSED RULES 



TITLE 4 - DEPARTMENT OF ECONOMIC 
AND COMMUNITY DEVELOPMENT 

lyotice is hereby given in accordance with G.S. 
I50B-21.2 that the Savings Institutions Division 
intends to amend rule(s) cited as 4 NCAC 16 A 
.0/03 - .0105; 16C .0101, .0103 - .0104, .0201 - 
.0203, .0305, .0401 - .0405, .0501 - .0503; 16F 
.0001 - .0003, .0006 - .0012; 16H .0001 - .0003, 
.0005 - .0008; 161 .0702 - .0704, .0801, .0803, 
.0901 - .0902, .1001 - .1003, .1101 - .1102, .1104 
- .1106, .1201 - .1203, .1301; I6J .0001 - .0003; 
16K .0001 - .0017; 16L .0002 - .0004; and adopt 
rule(s) cited as 4 NCAC 16C .0105; 16E .0/03 - 
.0105, .0201 - .0204, .0301 - .0303, .0401 - .0405, 
.0501 - .0502, .0601 - .0602, .0701 - .0702. 

1 he proposed effective date of this action is 
February 15, 1992. 

1 he public hearing will be conducted at 10:00 
a.m. on November 19, 1991 at the Hearing Room, 
3rd Floor, 11 10 Navaho Drive, Raleigh, N.C. 

Jtveason for Proposed Action: These Rules are 
required by the adoption by the General Assembly 
of Chapter 54C of the General Statutes. 



Co 



■ omment Procedures: All requests to present 
testimony must be received at the Division's ad- 
dress at least 48 hours before the hearing. Writ- 
ten comments will be received for 30 days after 
publication of the notice of hearing. 

tLditor's .Xote: These Rules have been filed as 
temporary rules effective October 2, 1991 for a 
period of 180 days to expire on March 31, 1992. 

CHAPTER 16 - SAVINGS INSTITUTIONS 

DIVISION: SAVINGS INSTITUTIONS 

COMMISSION 

SUBCHAPTER 16A - GENERAL PROVISIONS 

SECTION .0100 - GENERAL 

.0103 DEFINITIONS 

Unless otherwise indicated, words and phrases 
defined by G.S. 54B-4 and OS. 54C-4 shall have 
the same meaning in this Chapter. 

Statutory Authority G.S. 54B-55; 54C-53. 

.0104 SUPERVISORY FEE 

The annual supervisory fee for associations 
savings institutions and their holding companies 
shall be collected in the month of July. This fee 
shall be non-refundable. 



Statutory Authority G.S. 54B-55; 54B-57; 
54C-53. 

.0105 RESTRICTIONS: PAYMENT OF 
DIVIDENDS AND REPURCHASE 
OF STOCK 

(a) A stock association savings institution shall 
not declare or pay a cash dividend on, or repur- 
chase any of, its capital stock if the effect thereof 
would be to reduce the net worth of the associ 
ation savings institution to an amount which is 
less than the minimum required by the federal 
regulatory authority and for savings banks, an 
amount less than the minimum required by G.S. 
54C-163. 

(b) Without the prior written approval of the 
Administrator, a stock association savings insti- 
tution which has been in operation or converted 
from mutual form for less than five years shall 
not repurchase any of its capital stock. 

(c) A stock association savings institution 
which has been in operation or converted from 
mutual form for less than five years shall obtain 
the written approval of the Administrator before 
declaring or paying a cash dividend on its capital 
stock in an amount in excess of one-half of the 
greater of: 

(1) the association's savings institution's net 
income for the most recent fiscal year end; 
or 

(2) the average of the association's savings 
institution's net income after dividends for 
the most recent fiscal year end and not 
more than two of the immediately pre- 
ceding fiscal year ends, if applicable. 

(d) For a period of three years following the 
date of completion of a conversion from mutual 
to stock form, no person shall, directly or indi- 
rectly, offer to acquire or acquire the beneficial 
ownership of more than ten percent of any class 
of an equity security of tke a converted associ 
ation savings institution without the prior written 
approval of the Administrator. Securities 
beneficially owed in violation of this Paragraph 
in excess of ten percent of any class of securities 
shall not be counted as shares entitled to vote 
and shall not be voted by any person or counted 
as voting shares in connection with any matters 
submitted to the stockholders for a vote. Unless 
made applicable by the Administrator by prior 
advice in writing, the restriction contained in this 
Paragraph shall not apply to any offer or an- 
nouncement of an offer which if consummated 
would result in the acquisition by a person, to- 
gether with all other acquisitions by that person 
of the same class of securities during the preced- 
ing 12-month period, of not more than one per- 



984 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



cent of the class of securities. Nor shall this 
Paragraph apply to: 

(1) any offer with a view toward public resale 
made exclusively to the association 
savings institution or its underwriters or 
the selling group acting on its behalf; or 

(2) any offer to acquire or acquisition of ben- 
eficial ownership of more than ten percent 
of the common stock of a» association a 
savings institution by a corporation whose 
ownership is or will be substantially the 
same as the ownership of the association, 
savings institution, provided that the offer 
or acquisition is made more than one year 
following the date of completion of the 
conversion. 

Statutory Authority G.S. 54B-43; 54B-55; 
54C-44; 54C-53. 

SUBCHAPTER 16C - APPLICATIONS 



(c) Each branch office of a» association a 
savings institution shall have the same name as 
that of the association; savings institution; pro- 
vided a» association a savings institution may, 
upon written approval of the Administrator, in- 
clude as part of its name a designation or branch 
name which reflects the identity of the branch 
office. The term "branch office" as used in this 
Paragraph shall mean a legally established place 
of business of a» association a savings institution 
other than the main office, including an office 
acquired through merger or any other legal 
means, where the business of the association 
savings institution may be conducted. 

(4) Each association chartered ef participating 

CT 1 11U1 CDT Ul lUr T ^ TV Ul ILUT C7v Ul UU1 1 IL'LiUJ. ItA-' f I 1111 

this Rule a* the first- annual meeting aftor the ef- 
footivo date »f this Piulo. 



Statutory Authority 
54C-12; 54C-53. 



G.S. 54B-I0; 54B-55; 



SECTION .0100 - CHARTER APPLICATION 

.0101 FORMS 

(a) Application for a mutual association 
savings institution is accomplished through the 
execution of Form MC. 

(b) Application for a stock association savings 
institution is accomplished through the execution 
of Form SC. 

(c) Forms MC and SC incorporate all statutory 
requirements and criteria and provide for the 
submission of required information. These 
forms can be obtained from and filed with the 
Division, at its mailing address. 

Statutory Authority G.S. 54B-9; 54B-55; 54C-9; 
54C-53. 

.0103 CORPORATE NAME 

(a) Aft association A savings institution shall 
not have the same name as that of another asso 
ciation savings institution or a name so similar 
to that of another association savings institution 
as to mislead the public. Each name shall eon- 
tain the words "savings and loan", "savings and 
loan association", or "savings bank". A» asso 
ciation A savings institution shall not use a name 
which has not been approved by the Adminis- 
trator. 

(b) In addition to the requirements of Para- 
graph (a) of this Rule, the name of each stock 
association savings institution shall contain the 
wording "corporation," "incorporated," 
"limited," or "company"; an abbreviation of one 
of such words; or other words sufficient to dis- 
tinguish stock associations savings institutions 
from mutual associations, savings institutions. 



.0104 INTERIM SAVINGS INSTITUTIONS 

The organization of an interim association 
savings institution may be requested as a part of 
an acquisition application or a supervisory 
transaction. The acquisition application shall 
contain specific reasons for the request to organ- 
ize an interim association, savings institution. 



Statutory A uthority 
54C-46: 54C-53. 



G.S. 54B-45; 54B-55; 



.0105 CONVERSION TO SAVINGS BANK 

Application to convert to a savings bank charter 
is accomplished through the execution of the 
Application For Conversion Of An Existing De- 
pository Institution Into A North Carolina 
Savings Bank. These forms can be obtained 
from and filed with the Division at its mailing 
address. 

Statutory Authority G.S. 54C-30; 54C-53. 

SECTION .0200 - BRANCH OFFICE 
APPLICATION 

.0201 FORM 

Application for a branch office of a» association 
a savings institution is accomplished through the 
execution of Form AB. Form AB incorporates 
all statutory requirements and criteria and pro- 
vides for the submission of required information. 
The form can be obtained from and filed with the 
Division, at its mailing address. 



Statutory Authority 
54C-23: 54C-53. 



G.S. 54B-22; 54B-55; 



.0202 BRANCH OFFICE APPLICATION 



6:15 NORTH CAROLINA REGISTER November I, 1991 



985 



PROPOSED RULES 



RESTRICTIONS 

If a branch office application is denied, the as- 
cociation savings institution shall wait at least six 
months before refiling another branch office ap- 
plication for any substantial part of the same 
service area as determined by the Administrator. 



Statutory Authority G.S. 54B-22; 
54C-23; 54C-53. 



54B-55; 



.0203 FORFEITURE OF BRANCH OFFICE 
FINAL APPROVAL 

Any association savings institution not opening 
its branch office within 12 months after final ap- 
proval shall forfeit such approval. Provided, the 
Administrator upon written application from the 
association, savings institution, for good cause 
shown, may grant the association savings insti- 
tution a six month extension within which to 
open the branch office. Provided further, in no 
event may a» association a savings institution 
delay opening a branch office for more than 18 
months after final approval. 

Statutory Authority G.S. 54B-55; 54C-53. 

SECTION .0300 - APPLICATION TO CHANGE 

LOCATION OF BRANCH OFFICE OR 

PRINCIPAL OFFICE 

.0305 PURCHASE OF BRANCH 

No association savings institution shall purchase 
a branch office without first obtaining the written 
approval of the administration. The association 
savings institution shall furnish such information 
as to the purchase as the Administrator may 
prescribe. 



Statutory Authority G.S. 
54C-24; 54C-53. 



54B-22; 54B-55; 



SECTION .0400 - REMOTE SERVICE UNITS 

.0401 DEFINITIONS 

As used in this Section, unless the context oth- 
erwise requires, the term: 

(1) "Generic data" means statistical informa- 
tion which does not identify any individual 
account holder. 

(2) "Personal security identifier" means any 
word, number, or other security identifier 
essential for an account holder to gain access 
to an account through use of an unmanned 
remote service unit. 

(3) "Remote service unit" means a customer 
communications terminal, point-of-sale ter- 
minal, automated teller machine, cash- 
dispensing machine, automated or other 
direct or or remote information processing 



device or machine, whether manned or un- 
manned, through or by means of which 
funds or information relating to any finan- 
cial service or transaction rendered to the 
public is stored and transmitted, instantane- 
ously or otherwise to or from a» association 
a savings institution terminal or terminals 
controlled or used by or with other parties. 



Statutory Authority G.S. 54B-55; 
54C-53; 54C-I46. 



54B-77; 



.0402 APPLICATION: GUIDELINES FOR 
APPROVAL BY ADMINISTRATOR 

(a) A» association A savings institution may 
apply to the Administrator for permission to es- 
tablish or use remote service units and participate 
with other parties in remote service unit oper- 
ations, on an unrestricted geographic basis. A» 
association A savings institution may share a re- 
mote service unit controlled by a third party or 
an institution not subject to examination by a 
State regulator)' agency only if such third part or 
institution has agreed in writing that the remote 
service unit is subject to such examination by the 
Administrator as he deems necessary. 

(b) Application for a remote service unit is ac- 
complished through the execution of Form RSU. 
Form RSU incorporates all regulatory require- 
ments and guidelines for the establishment of a 
remote service unit and provides for the sub- 
mission of required information. This form can 
be obtained from and filed with the Division, at 
its mailing address. 

(c) The Administrator shall consider the fol- 
lowing guidelines when reviewing an application 
to establish a remote service unit: 

(1) The policies, financial condition, and op- 
eration of the applicant afford no basis for 
supervisory objection. 

(2) The proposed remote service unit will be 
established within six months of approval; 
provided, for good cause shown, the Ad- 
ministrator, upon written application 
from the association savings institution 
may grant the association savings institu- 
tion a six-month extension within which 
to establish the remote service unit. 

Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-/46. 

.0403 GENERAL POLICIES 

(a) Prohibited uses. A remote service unit shall 
not be used to open savings accounts or establish 
loan accounts. 

(b) Service charges. A-» association A savings 
institution may impose service charges for remote 
service unit financial services. 



9S6 



6:15 NORTH CAROLINA REGISTER November 1, 1 99 1 



PROPOSED RULES 



(c) Bonding. A» aooooiation A savings insti- 
tution shall take all steps necessary to protect its 
interest in financial services processed at each re- 
mote service unit, including obtaining available 
fidelity, forgery, and other appropriate insurance. 

(d) Security. Aft aooociation A savings insti- 
tution shall protect electronic data against 
fraudulent alterations or disclosure. 

Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-146. 

.0404 UNMANNED REMOTE SERVICE UNIT 
ACCESS TECHNIQUES 

Aft association A savings institution shall pro- 
vide a personal security identifier to each account 
holder and require its use when accessing an un- 
manned remote service unit. The association 
savings institution shall not employ unmanned 
remote service unit access techniques that require 
the account holder to disclose a personal security 
identifier to another person. The association 
savings institution shall inform each account 
holder that the personal security identifier is for 
security purposes and shall not be disclosed to 
third parties. Any device used to activate an 
unmanned remote service unit shall bear the 
words "Not Transferable" or their equivalent. 
A passbook may not be such a device. 



Statutory Authority G.S. 54B-55; 
54C-53; 54C-146. 



54B-77; 



.0405 PRIVACY OF ACCOUNT DATA 

Aft association A savings institution shall allow 
account holders to obtain any information con- 
cerning their remote service unit accounts. Ex- 
cept for generic data or data necessary to identify 
a transaction, a» association a savings institution 
shall not disclose account data to third parties, 
other than the Administrator or his agents, unless 
express written consent of the account holder is 
given, or applicable law requires. A» association 
A savings institution may operate a remote ser- 
vice unit according to an agreement with a third 
party e* financial institution if the third party 
agrees to abide by this Rule as to information 
concerning remote service unit accounts in the 
association, savings institution. 

Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-146. 

SECTION .0500 - INTERSTATE RECIPROCAL 
ACQUISITIONS 

.0501 FORM 

Application for approval to acquire a North 
Carolina association savings institution is ac- 
complished through the execution of Form AQr 



an Acquisition Application. The form can be 
obtained from and must be filed with the Divi- 
sion, at its mailing address. 

Statutory Authority G.S. 54B-48.6; 54B-55; 
54C-53; 54C-178. 

.0502 ACQUISITION RESTRICTIONS 

(a) A Southern region savings aftd- loan associ 
ation institution or holding company which has 
a pending acquisition application Acquisition 
Application may not file an additional acquisi 
t*e» application Acquisition Application until 
the pending application has been approved by 
the Administrator. 

(b) An acquisition application Acquisition 
Application which has been denied by the Ad- 
ministrator shall not be processed upon refiling 
unless a period of six months has elapsed since 
the denial. 

Statutory Authority G.S. 54B-48.6; 54B-55; 
54C-53; 54C-178. 

.0503 FEES 

(a) The acquisition application Acquisition 
Application fee is the same as for a savings a«4 
loan institution holding company application. 

(b) The administration fee for a« association a 
savings institution acquired by a Southern region 
savings aftft loan association institution or hold- 
ing company shall be the same as the supervisory 
fee for a North Carolina association savings in- 
stitution of similar asset size. 

(c) The Southern region savings a«4 lea» as- 
sociation institution or holding company that has 
acquired an association shall pay the same su- 
pervisory fee as a North Carolina holding com- 
pany. 

(d) If comparable fees in the home state of the 
parent association savings institution or holding 
company are higher than the applicable North 
Carolina fee, then the higher fee shall be appli- 
cable. 

Statutory Authority G.S. 54B-48.6; 54B-55; 
54C-53; 54C-178. 

SUBCHAPTER 16E - OPERATION OF SAVINGS 
BANKS 

SECTION .0100 - DIRECTORS, BYLAWS AND 
CHARTER 

.0103 COMPOSITION OF BOARD OF 
DIRECTORS 

(a) Requirements for the composition of a 
board of directors are as follows: 

(1) Except in the case of a savings bank hav- 
ing 80 percent or more of any class of 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



987 



PROPOSED RULES 



voting shares owned by a holding com- 
pany or controlling person, no more than 
one-third of the Board of Directors shall 
be salaried officers or employees ot the 
savings bank, or of any subsidiary or any 
holding company or alTdiate thereof or 
any controlling person affiliate thereof. 

(2) In the case of a savings bank having 80 
percent or more of anv class of voting 
shares owned by a holding company or 
controlling person, no more than 49 per- 
cent of the Board of Directors shall be 
salaried officers or employees of the 
savings bank, or of any subsidiary or any 
holding company or affiliate thereot or 
any controlling person affiliate thereof. 

(3) No more than two directors shall be 
members of the same immediate tamilv. 

(4) No two directors who are attorneys may- 
be members of the same law firm. 

(5) The managing officer of the savings bank 
shall be a member of the Board of Direc- 
tors. 

(b) A director shall not vote on any matter in 
wluch he has a personal or financial interest. 

(c) When a savings bank takes action resulting 
in the establishment of a new chief executive of- 
ficer or director, the savings bank shall notify the 
Administrator in advance in writing of such 
change, and shall provide the name of the new 
chief executive officer or director, the effective 
date of the appointment, and a statement of the 
person's past and current business and profes- 
sional affiliations. The name of anv departing 
chief executive officer or director shall also be 
provided to the Administrator in writing. 



banks that cross the fifty million dollar 



(d) Significant ownership interest for the pur- 
poses of G.S. 54C-101(c) shall depend upon the 
ownership circumstances of each savings bank as 
determined bv the Administrator. However, 
without the written consent of the Administrator, 
at a minimum, for savings banks under titty 
million dollars (S50.000.000) jn assets, such 
ownership shall be stock ownership jn the insti- 
tution or its holding company of at least two 
thousand five hundred dollars (S2. 500.00) in 
market value at time of purchase for a stock 
savings bank or at least a two thousand five 
hundred dollar (S2.500.00) deposit relationship 
for a mutual savings bank. For savings banks 
of over fifty million dollars (S50.000.000) in as^ 
sets, at a rrrinimum. absent a finding ot special 
circumstances bv the Administrator, such own- 
ership shall be stock ownership in the institution 
or its holding company of at least a five thousand 
dollar (S5.000.00) jn market value at the time of 



($50,000,000) threshold, the Administrator will 
allow a reasonable period for the Directors to 
comply with the ownership interest requirement. 

Statutory Authority G.S. 54C-53; 54C-101. 

.0104 BYLAWS 

The Administrator shall be deemed to have ap- 
proved anv bylaws or amendments to which he 
has not objected within 25 days after the date on 
which such bylaws or amendments are filed. 

Statutory Authority G.S. 54C-53; 54C-I02. 

.0105 AMENDMENT OF CONVERTED 
SAVINGS BANK'S CHARTER 

(a) Notwithstanding anything contained in a 
savings bank's charter or bylaws, a savings bank 
which has converted from mutual to stock form 
may amend its charter to provide for the appli- 
cation of anv or all of the following provisions, 
to apply for no more than five years from the 
date of completion of conversion: 

(1) Beneficial Ownership Limitation. No 
person shall directly or indirectly offer to 
acquire the beneficial ownership of more 
than ten percent of any class of an equity 
security of the savings bank. This limita- 
tion shall not apply to a transaction jn 
which the savings bank forms a holding 
company without change in the respective 
beneficial ownership interests of its stock- 
holders other than pursuant to the exer- 
cise of anv dissenter and appraisal rights 
or the purchase of shares bv underwriters 
jn connection with a public offering. In 
the event shares are acquired in violation 
of this provision, all shares beneficially 
owned bv anv person jn excess of ten 
percent shall be considered "excess 
shares" and shall not be counted as shares 
entitled to vote and shall not be voted by 
any person or counted as voting shares jn 
connection with any matters submitted to 
the stockholders for a vote. 



(2) Cumulative 



Voting Limitation. 



at the time of (b) 



purchase for a stock savings bank or at least a 
five thousand dollar (S5.000.00) deposit relation- 
ship for a mutual savings bank. For savings 



Stock- 
holders shall not be permitted to cumulate 
their votes for election of directors. 

Call for Special Meetings. Special 
meetings of stockholders relating to 
changes jn control of the savings bank or 
amendments to its charter shall be called 
onlv upon direction of the Board of Di- 
rectors. 

For purposes of this Section, the following 
definitions apply : 

( 1) '1 "he term "person" includes an individual, 
a group acting in concert, a corporation. 



988 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



a partnership, an association, a joint stock 
company, a trust, an unincorporated or- 
ganization or similar company, a syndi- 
cate, or any other group formed for the 
purpose of acquiring, holding or disposing 
of the equity securities of a savings bank. 

(2) The term "offer" includes every offer to 
buy or otherwise acquire, solicitation of 
an offer to sell, tender offer for, or request 
or invitation for tenders of, a security or 
interest in a security for value. 

(3) The term "acquire" includes every type of 
acquisition whether effected by purchase, 
exchange, operation of law or otherwise. 

(4) The term "acting in concert" means the 
knowing participation in a joint activity 
or conscious parallel action towards a 
common goal whether or not pursuant to 
an express agreement, or a combination 
or pooling of voting or other interests in 
the securities of an issuer for a common 
purpose pursuant to any contract, under- 
standing, relationship, agreement or other 
arrangements, whether written or other- 
wise. 

Statutory Authority G.S. 54C-33; 54C-53. 



(3) The proxy shall not be part of any other 
document or instrument. Provided, 
however, that a carbex signature card (a 
two-part form consisting of a signature 
card and proxy card) is specifically per- 
mitted. The account holder must sign 
both the signature card and the proxy card 
in order to validate them, 
(b) The proxy may include provisions permit- 
ting both permanent revocation of the proxy as 
to any particular meeting or meetings, and a 
provision that the proxy will remain valid until 
"cancelled by a writing delivered to the Secretary 
of the savings bank". 

Statutory Authority G.S. 54C-53; 54C-105. 

.0203 HOLDERS OF PROXIES 

A proxy shall not designate as a holder any 
corporation or partnership including any person 
acting on behalf of any corporation or partner- 
ship, or any person other than a living, natural 
person. However, a proxy may designate the 



holder of a specified title or office, if a natural 
person; or committee composed solely of natural 
persons, including a committee composed of the 
Board of Directors of the savings bank. 



SECTION .0200 - PROXIES 

.0201 VOTING BY PROXY 

(a) Voting rights in the affairs of a savings bank 
shall be exercised by voting either in person or 
by proxy. 

(b) For purposes of this Rule, the term 
"proxy" shall include every written form of au- 
thorization by which a member or a stockholder 
of a savings bank or his attorney in fact can ap- 
point one or more agents to act for him in the 
exercise of his voting rights in the affairs of the 
savings bank. 

Statutory Authority G.S. 54C-53; 54C-/05. 

.0202 FORM OF PROXY 

(a) Every form of proxy solicited by a savings 
bank shall conform to the following require- 
ments: 

(1) The proxy shall be revocable at will, with 
the power to revoke not being condi- 
tioned on any event or occurrence or 
otherwise limited; however, a proxy may 
be made irrevocable to the extent permit- 
ted by the applicable provisions of G.S. 
55-7-22 and only when the proxy clearly 
indicates that it is to be irrevocable. 

(2) The proxy shall be clearly labeled 
"Revocable Proxy" in at least 18-point, 
boldface type. 



Statutory Authority G.S. 54C-53; 54C-105. 

.0204 PROXY SOLICITATION 

A proxy shall not be solicited by means of any 
oral or written communication which: 

(1) solicits any undated or postdated proxy; 

(2) solicits any proxy providing that it shall be 
deemed to be dated as of any date subse- 
quent to the date on which it is signed by the 
member or stockholder; 

(3) contains any statement that is false or mis- 
leading with respect to any material fact; or 

(4) omits to state any material fact: 

(a) necessary to make the statements therein 
not false or misleading; or 

(b) necessary to correct any statement in any 
earlier communication with respect to the 
solicitation of a proxy for the same meet- 
ing or subject matter that has subse- 
quently become false or misleading. 

Statutory Authority G.S. 54C-53; 54C-J05. 

SECTION .0300 - RECORDS AND POLICIES 

.0301 GENERAL POLICIES 

(a) Records to be Kept at Principal Office. 
Every savings bank shall keep at the principal 
office correct and complete books of account and 
minutes of the proceedings of members, share- 
holders, directors and committees. Complete 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



989 



PROPOSED RULES 



records of all business transacted at the principal 
office shall be maintained at the principal office. 
Everything relating to the business of a savings 
bank shall be examined and investigated by the 
Administrator on a regular and periodic basis. 
Every savings bank and service corporation 
thereof shall be audited at least once in each cal- 
endar year by independent auditors. The audit 
shall be done on the basis of generally accepted 
accounting principles, unless otherwise provided 
by this Chapter. The savings bank shall file with 
the Administrator one copy of the audit report 
along with one copy of the auditor's management 
letter and any other letters regarding the audit 
within 211 days after the end of its fiscal year, un- 
less extended in writing by the Administrator. 
The savings bank shall also submit to the Ad- 
ministrator a copy of the savings bank's written 
response to the auditor s management letter at 
the time such response is provided to the appro- 
priate federal regulatory authority. 

(b) Records to be Prepared at Branch Office. 
Each branch office shall prepare detailed records 
of all business transacted at such branch office, 
and shall furnish lull control records to the prin- 
cipal office. 

(c) Books to be Closed on December 31. Ev- 
en' savings bank shall close its books at the close 
of business on December 31 of each year, or 
other dates if authorized by the Administrator. 



(d) Bonds and Other Obligations to be Carried 

at Actual Costs. 1 he bonds or other investments 
of a savings bank shall not be carried on its 
books at more than the actual costs thereof. 



the total amount invested by such savings bank 
on account of such real estate, including ad- 
vances, costs, and improvements, but excluding 
accrued, uncollected interest. 

(f) Appraisal of Real Estate Owned. Every 
savings bank shall appraise each parcel of real 
estate at the time of acquisition thereof. The re- 
port of each such appraisal shall be submitted in 
writing to the Board of Directors and shall be 
kept in the records of the savings bank. 

(g) Maintenance of Membership Records. 
Every mutual savings bank shall maintain mem- 
bership records, which shall show the name and 
address of the member, the status of member, 



status of the member as a deposit account holder, 
or an obligor, or a deposit account holder and 
obligor, and the date of the membership thereof, 
(h) Maintenance of Stockholder Records. Ev- 
ery stock savings bank shall keep at its principal 
office or at the office of its transfer aaent or res 



ister, a record of its stockholders which contains 
the names and addresses of all stockholders, and 
the number, class and series of shares held by 
each. Whenever called upon by the Administra- 
tor, a stock savings bank shall file in the office 
of the Administrator a correct list of all its 
stockholders, the resident address of each, the 
number of shares of stock held by each, and the 
dates of issue. When ten percent or more of the 
outstanding capital stock of the savings bank 
shall be controlled by one owner, a savings bank 
shall advise the Administrator in writing, and 
shall include the resident address and number of 



{£]_ Real Estate to be Carried at Amount In- shares held by the shareholder, 
vested in Same. A savings bank shall not carry 
any real estate on its books at a sum in excess of Statutory Authority G.S. 54C-22; 54C-53. 

.0302 RETENTION, REPRODUCTION AND DISPOSITION OF RECORDS 

(a) Each savings bank shall take reasonable precautions to protect records from damage by fire, flood 
or other hazards, and to safeguard records from unnecessary deterioration as a result of excess heat, 
humidity, dryness or lack of proper ventilation. Adequate safeguards shall be maintained to protect 
records from access or removal by unauthorized persons. 

(b) Each savings bank or branch officer thereof shall retain all records set forth in this Paragraph for 
at least the periods specified. 



RECORDS TO BE 
RETAINED 



MINIMUM RETENTION 
PERIOD (YRS.) 



CORPORATE 

Audit Reports 

Pension Trust (IRS Ruling, Bylaws, Trust Agreements) 

Annual Reports to Supervisors 

Examination Reports and Supervisory Letters 

Minute Books, (Members, Stockholder, Directors and Committees) 

Charter, Bylaws and Amendments 

Blanket Bonds 

Ballots and Proxy Votes of Members and Stockholders 

Certificate of Insurance 



3 

5 
5 
P 
P 

I±5 
3 

P 



990 



6:15 NORTH CAROLINA REGISTER November 1, 1 991 



PROPOSED RULES 



FHLB Membership Certificate P 

Attachments, Executions and Releases 3 

Claims, Court Orders and Restraining Orders 10 

Deeds, Leases and Contracts; Titles to Vehicles T + 5 

U.S. Corporate Income Tax Forms 15 

N.C. Corporate Tax Forms 15 

Social Security and Unemployment Tax Records 15 

Personal Property Tax Records 15 

ACCOUNTING - ASSOCIATION 

Bank Statements and Reconcilements 5 

Cancelled Checks 5 

Check Vouchers or Stubs 5 

Duplicate Deposit Slips 5 

Expense and Paid Bills File 3 

FHLB and State Reports 5 

General and Subsidiary Ledgers P 

General and Other Journals P 

Original Entry Records 5 

Pre-authorized Bank Forms 5 

Tellers' Cash Proof Sheets 2 

Trial Balances 3 

DEPOSIT ACCOUNTS 

Deposit 5 

Inheritance Tax Releases 10 

Cancelled Savings Certificates 5 
Withdrawal Slips or Checks 

Affidavits for Lost Passbook or Certificate P 

Lost Instrument Bonds for Passbooks or Certificates P 

Power of Attorney or Affidavits P 

Signature Card Files T + 5 

Savings Certificates Record of Issue T + 5 

Deposit Account Loan Notes R 

Deposit Account Loan Disclosures After Note "Paid" 2 

Deposit Account Assignment or Transfer Records P 

Returned 1099 Forms 6 

No- Mail Notice T +_ 4 

MORTGAGE LOANS 

Loan Register P 

Mortgage Loan Disclosure Statement (Form HMDA-1) 5 

Commitments T + 3 

Signature Cards I' + 3 

Construction Loan Agreement T + 3 

Cost Estimates T j^3 

Inspection Reports !' + 3 

Waiver of Liens T ~±_ 3 

Paid Bills for Borrowers Construction T + 3 

Affidavits ~ ~ J. 1.1 

Collection Records T + 3 

FHA Insurance Receipts f + 3 

Applications T + 3 

Appraisals T + 3 

Construction Loan Authorizations T + 3 

Credit Reports T +_ 3 

Escrow Agreements and Records T + 3 

Title Opinions T +_ 3 

Disclosure and Recision T + 3 



6:15 NORTH CAROLINA REGISTER November 1, 1991 991 



PROPOSED RULES 



Flood Insurance Documentation T + 3 

Additional Collateral Agreement T + 3 

Settlement Statement T + 3 

Correspondence T + 3 

Modifications T + 3 

LOANS (Commercial, Consumer Credit, Credit Cards) 

Borrowers' Statement T + 3 
Posting or Transaction Journal 3 

Loan Proceeds Disbursement Records T + 3 

Interest Rebate Record T + 3 

Loans Made Record T +_ 3 

Loans Paid Record T + 3 

Liability Card and or Ledger T + 3 

Loan Ledger Cards T + 3 
Note and or Loan Register P 

Resolutions T + 3 
Charged-off Loan Records 10 

Collateral Records 10 

Disclosure Document 2 

Customer Application T + 1 
Sales Tickets or Drafts - Credit Card 3 

Statement of Account - Credit Card 5 

Merchant Agreement - Credit Card T + 2 

REAL ESTATE OWNED 

Trustee's Report T + 3 

Appraisal T + 3 

Contracts for Sale T + 3 

Leases T + 3 

Tax Records T + 3 

Deeds 1±3 

PMI Claims !+.! 

Notice of Intent to Foreclose T +_ 3 

Title Policies I +.1 

INSURANCE 

Public I lability - Workers Compensation 10 

Fire and E xtended Coverage, Auto Errors and Omissions 3 

Directors and Otficers Liability 10 

MISCELLANEOUS 

Savings Bonds 

Applications 2 

Duplicate Stubs 2 

I etter of Transmittal of Bonds Redeemed 2 

Monthly Report of Sales and Lloldings 2 

Travelers Checks 

Applications 2 

Consignment Receipts 2 

Personnel Records 

Time Cards 3 

Group Insurance Records T +_ 6 
Employment Applications 

1. Hired T + 3 



992 6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



2. Not Hired 
Payroll Records 

Safe Deposit Boxes 
Rent Receipts 
Lease Contracts 
Histor\' Cards 



3 

10 



3 

T +.3 

P 



Investments 
Reaster 

Purchase and Sale 
Safe- Keeping Receipts 

Mail Register 

General Correspondence 

OS HA 

OSHA Records and Reports 

Purchases, Sales and Participation 
Agreement 
Sale List 
Remittance Report 

All Retirement Plan Accounts 

All Related Forms and Documents 

KEY TO SYMBOLS USED 

P Permanent 

1 Termination (Closed, Paid-off or Settled) 

R Return to Customer After Termination of Contractual Relationship 



P 

T +.3 
T + 3 



1 +.3 

T +_3 
T + 3 



T + 7 



Statutory Authority G.S. 54C-53. 

.0303 REQUIRED POLICIES 

Every savings bank shall adopt, implement and 
maintain the following written policies. Not less 
than annually, the Board of Directors shall re- 
view and formally readopt these policies for use 
by the savings bank. The Administrator may 
require such additional written policies as the 
Administrator deems appropriate for the specific 
circumstances of each savings bank. 

(1 ) Appraisal. A policy which insures that 
appraisals reflect professional competence 
and facilitate the reporting of estimates of 
market value upon which the savings bank 
relies to make lending decisions. 

(2) Classification of assets. A policy which 
requires the Board of Directors to review the 
classification of the savings bank's assets at 
least quarterly and establishes, at a mini- 
mum, the following categories: 

(a) Special Mention. Assets which require 
close attention because they have a po- 
tential weakness or pose an unwarranted 
financial risk that, if not corrected, could 



weaken the asset and increase risk in the 
future, 
(b) Substandard. Assets which are inade- 



quately protected by the current net worth 
and paying capacity of the obligor or of 
the collateral pledged, if any. Assets so 
classified must have a well-defined weak- 



ness or weaknesses. They are character- 



ized by_ the distinct possibility that the 
savings bank will sustain some loss if the 
deficiencies are not corrected. 

(c) Doubtful. Assets which have all the 
weaknesses inherent in those classified 
Substandard with the added characteristic 
that the weaknesses make collection or 
liquidation in full, on the basis of cur- 
rently existing facts, conditions, and val- 
ues, highly questionable and improbable. 

(d) Loss. Assets which are considered un- 
collectible and of such little value that 
their continuance as assets is not war- 
ranted. This classification does not mean 
that an asset has absolutely no recovery 



6:15 NORTH CAROLINA REGISTER November I, 1991 



993 



PROPOSED RULES 



or salvage value, but, rather, that it is not 
practical or desirable to defer writing off a 
basically worthless asset even though par- 
tial recovery may be effected in the future. 
(3) General valuation allowances. A policy for 
determining and maintaining prudent levels 
of general loss reserves including a formula 
which specifically addresses the risks associ- 



ated with the particular lending and invest- 
ment practices of the savings bank. 

(4) Loan underwriting. A policy which, at a 
minimum, establishes the guidelines to be 
used by the savings bank in lending its funds 
for the following activities, as applicable to 
the savings bank's lending practices: resi- 
dential mortgage lending, acquisition and 
development lending, construction lending, 
other mortgage lending, commercial lending 
and consumer lending. 

(5) Risk management. A policy which estab- 
lishes the savings bank's asset liability struc- 
ture and defines, at a minimum, the 
parameters for interest rate risk, liquidity 
risk, credit risk and capital adequacy. 

(6) Investment policy. A policy which, at a 
minimum, defines the tvpes and levels of 
permissible investments and the officers with 
investment authority and which distin- 
guishes those assets held for sale, trading or 
investment purposes including specific de- 
scriptions of anv hedging techniques which 
the institution may employ. 

Statutory Authority G.S. 54C-53. 

SECTION .0400 - LOANS 

.0401 SERVICING LOANS 

A savings bank may service loans originated by 
the savings bank or bv other lenders. 

Statutory Authority G.S. 54C-53. 

.0402 APPRAISALS 

Except as exempted under the regulations of the 
appropriate federal regulatory agency, a savings 
bank shall not grant, make, disburse any portion 
of, or invest its funds in anv loan on the security 
of real estate, until at least one qualified person, 
whose compensation shall not be affected in any 
wav bv the approval or denial of the loan, has 
appraised the real estate security in accordance 
with the regulations of the appropriate federal 
regulaton qgcncs . 

Statutory Authority G.S. 54C-53; 54C-I2S. 

.0403 RECORDS WITH RESPECT TO LOANS 



(a) Mortgage Loans. Each savings bank shall 
maintain records with respect to each loan on the 
security of real estate which shall include: 

(1) An application signed by the borrower 
or his agent, containing adequate infor- 
mation which shall include the purpose 
of the loan, the identity of the property 
or properties securing the loan, and the 
purchase price of the property paid bv or 
agreed to be paid bv the applicant where 
the purpose of the loan is for the purchase 
of the real estate securing such loan; 

(2) The credit ability of the applicant shall 
be ascertained in the application or bv 
credit report, a financial report or by oth- 
ers at the request of the savings bank; 

(3) A written appraisal report conforming to 
the written appraisal policy of the savings 
bank, signed and dated prior to the ap- 
proval of the application; 

(4) Evidence to show: 

(A) proper approval of the loan and the 
terms and conditions of such approval: 

(B) a loan settlement statement, signed by 
the borrower, showing the distribution of 
the loan proceeds; 

(C) the savings bank's approved attorney's 
title opinion or a valid title insurance pol- 
icy from a title insurance company au- 
thorized to do business in North Carolina; 

(D) hazard insurance coverage; 

(E) release or releases of any portion of the 
collateral, with a revised appraisal of the 
remaining security retained; and 

(E) the loan agreement, inspection reports, 
owner's and contractor s affidavits and 
other necessary procedures on con- 
struction loans, where applicable; 

(5) All loan modifications, properly executed 
and documented and recorded in the 
minutes; 

Record of insurance expirations unless a 
master mortgagee insurance policy is held 
in full force and effect; 

Tax records; 



m 



m 

(81 



A mortgage loan register to show: 



(A) account number; 

(B) borrower's name; 



(C) date of deed of trust; 

(D) appraisal; 

(E) interest rate: 

(E) monthly payment and date of first 

payment; 
(G) purpose of the loan and purchase price 

if for purchase of property securing the 

loan and the contract price if for purposes 

of construction; and 
(H) hypothecation, if any, designating 

hvpothecator, amount, and tvpe of pledge 



994 



6:15 NORTH CAROLINA REGISTER November 1, 1 99 1 



PROPOSED RULES 



collateral; all to be incorporated in the 
hypothecation agreement; 
(9) Records on acquisition of mortgaged se- 
curity to include: 
(A) a detailed record of the acquisition, 
whether through foreclosure or otherwise, 



and a description of the property or 
properties including the name of the for- 
mer owner; 

(B) maintenance of subsidiary ledger ac- 
counts for each separate acquisition, to 
record all items subject to capitalization 
or to income and expense during the pe- 
riod such property is owned by the 
sayings bank; 

(C) designation of all fees, charges and 
commissions and to whom such were 
paid, 

(D) a copy of the trustee's report relating 
to foreclosure, when applicable; 

(10) A review of 60 days or over delinquent 
mortgage loans by the savings bank's 
board of directors or executive committee 
at least once a month and such review to 
be recorded in the minutes of the Board 
of Directors or Executive Committee 
meeting; 

(11) A "loans in process account" to support 
the undisbursed portion of the proceeds 
of each construction loan; and 

(12) A certification signed by the borrower 
indicating that the borrower has received 
the disclosure material required by the 
Federal Truth-In-Lending Act, 15 L'SC 
1601 et_ seq. 

(b) Deposit Account Loans. Each savings 
bank shall maintain records with respect to each 
loan secured bv deposit accounts which shall in- 
clude a deposit account loan register. Such loan 
register or registers shall include: 

( 1) account number; 

(2) borrower's name; 

(3) date of loan; 

(4) interest rate; 

(5) payment schedule. 

(c) Consumer Loans. 



Defined as loans for 



personal, family or household purposes and loans 
incident thereto, which may be made as either 
open end or closed end consumer credit, but not 
including credit extended in connection with 
credit cards or bona fide overdraft loans. Each 
institution shall maintain records with respect to 
each consumer loan which shall include: 

( 1 ) An application signed by the borrower 
or his agent, containing adequate infor- 
mation which shall include the purpose 
of the loan, the identity of the collateral 
securing the loan and the purchase price 



ill 



01 



{41 



of the collateral where the purpose of the 
loan is to purchase said collateral. 

The credit ability of the applicant shall 
be ascertained in the application and sup- 
ported by a written credit report and a 
complete financial statement, verified and 
analyzed bv a qualified loan officer. 

A written appraisal or value estimate of 
the collateral conforming to the written 
policies of the institution and dated prior 
to the approval of the application if the 
loan is to be secured. 

An approved attorney's title opinion or 
valid title insurance policy issued by an 
insurance company authorized to do 
business in North Carolina if the loan is 
underwritten based on the value of real 
estate collateral. 



(5) Evidence to show: 

(A) proper approval of the loan and the 
terms and conditions of such approval; 

(B) the distribution of the loan proceeds; 

(C) proper insurance coverage on the 
collateral; 

(D) perfection of liens or security interest 
by proper endorsement of automobile ti- 
tles and or L'CC filings. 

(6) All loan modifications, extensions and 
renewals properly executed and docu- 
mented and, if required bv the savings 
bank's consumer lending policy, recorded 
in the minutes. 

(7) A consumer loan register to show: 



[Al 
{Bj 

LPi 

mi 



account number; 



borrower's name; 
date of loan; 



schedule and date of first 



payment 
payment; 

(F) purpose of loan; 

(G) type and value of collateral, if secured, 
(d) Commercial Loans. Defined as any loan 

for commercial, corporate, business or agricul- 



tural purposes which would not otherwise qualify 
as a mortgage loan. Each institution shall 
maintain records with respect to each commercial 
loan which shall include: 

( 1) An application signed bv the borrower 
or his agent containing adequate informa- 
tion to include the purpose of the loan, 
and the collateral securing the loan (if ap- 
plicable). 

(2) The credit ability of the applicant shall 
be ascertained in the application and sup- 
ported by a written credit report and a 
complete set of current financial state- 
ments, verified and analv/.ed by a qualified 
loan officer. 



6:15 NORTH CAROLINA REGISTER November I, 1991 



995 



PROPOSED RULES 



(3) A written appraisal report, if secured by 
real estate, or other written estimate of 
value contorming to the institution's poli- 
cies if secured by other than real estate. 

(4) Evidence to show: 



(A) proper approval of the loan and the 
terms and conditions of such approval; 

(B) a loan settlement statement, signed by 
the borrower, showing the distnbution of 
the loan proceeds; 

(C) adequate perfection of all liens and se- 
curity interests including attorney's title 
opinion or valid title insurance policy 
from a title insurance company authorized 
to do business in North Carolina if se- 
cured bv commercial real estate; 

(D) appropnate insurance on all collateral; 

(E) release or partial releases of collateral, 
with a revised appraisal of the remaining 
collateral; 

(F) all loan modifications, extensions and 
renewals, properly executed and docu- 
mented and recorded in the minutes. 

(5) A commercial loan register to show: 

( A ) account number; 

(B) borrower s name; 

(C) date of note; 

( D) appraisal or other estimate of value; 

(E) interest rate; 

(F) payment schedule and date of first 
payment: 

(G) loan purpose and type of collateral, if 
secured. 



Statutory Authority G.S. 54C-53; 54C-128. 

.0404 UNSECURED LOANS LIMIT 

The aggregate amount of unsecured loans out- 
standing which may be made by a savings bank 
to any one borrower shall not exceed five percent 
of its net worth; provided, that a savings bank 
may, in any event, make up to live thousand 
dollars (£5,000) m unsecured loans to anv one 
borrower. 



Statutory Authority G.S. 54C-53; 54C-12I. 

.0405 LOANS TO ONE BORROWER 

Upon a written determination bv the Adminis- 
trator that a savings bank is operating with un- 
safe and unsound lending practices, the 
Administrator may establish more restrictive 
limits on loans to any one borrower than the 
limits provided bv G.S. 54C-130. These restric- 
tive amounts shall be at such Limits as the Ad- 
ministrator deems appropnate to protect the 
public. 

Statutory Authority G.S. 54C-53; 54C-/2S. 



SECTION .0500 - DEPOSIT ACCOUNTS 

.0501 SIGNATURE CARDS 

When a savings bank issues a deposit account, 
it should obtain and preserve in its records a card 
containing the signature of the account holder, 
or his duly authorized representative, for the 
comparison of signatures or for other purposes; 
provided however, it shall not be necessary to 
obtain more than one signature card for accounts 
held by an account holder in the same name or 
capacity. 

Statutory Authority G.S. 54C-53; 54C-164. 

.0502 HOLDING OF CERTIFICATE OR 
PASSBOOK 

An unpledged savings certificate or passbook 
shall not be held by a savings bank for the con- 
venience of an account holder or otherwise unless 
properly controlled. 

Statutory Authority G.S. 54C-53; 54C-164. 

SECTION .0600 - LIQUIDITY AND NET 
WORTH 

.0601 LIQUIDITY 

A savings bank shall maintain cash and readily 



marketable investments of not less than ten per- 
cent of its assets. The term "cash" shall include 
unpledged demand accounts in other federally 
insured depository mstitutions, a Federal Home 
Foan or Federal Reserve Bank, or the Bank for 
Savings and Loan Associations. 



Statutory Authority G.S. 54C-53; 54C-162. 

.0602 NET WORTH 

(a) A savings bank shall maintain a net worth 
of not less than five percent of its assets. Anv 
intangible assets shall be deducted from net 
worth and assets in computing this requirement. 

(b) Anv request pursuant to G.S. 54C- 163 for 
a temporary suspension of this net worth re- 
quirement shall include a plan that demonstrates 
the manner in which net worth will exceed the 
minimum requirement bv the end of the re- 
quested suspension period. 

Statutory Authority G.S. 54C-53: 54C-163. 

SECTION .0700 - INVESTMENTS 

.0701 SECURITIES 

A savings bank may invest in any security that 
has been rated at least BAA or equivalent bv a 
nationally recognized rating service. In no case 
may investments in BAA or equivalent securities 



996 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



exceed in the aggregate 25 percent of net worth 
without the express written permission of the 
Administrator. 



Statutory Authority G.S. 54C-53; 54C-14I. 

.0702 STOCK IN OTHER DEPOSITORY 
INSTITUTIONS 

(a) No savings bank shall invest in the stock 
of another depository institution without giving 
prior written notice to the Administrator. 

(b) No savings bank shall invest in the aggre- 
gate more than five percent of its net worth in the 
stock of other depository institutions without the 
prior written approval of the Administrator. 

Statutory Authority G.S. 54C-53; 54C-141. 

SUBCHAPTER 16F - SERVICE CORPORATIONS 
AND FINANCE SUBSIDIARIES 

.0001 PERMITTED ACTIVITIES 

The service corporation of a» association a 
savings institution may engage in those activities 
which are approved by the federal regulatory au- 
thority for service corporations owned solely by 
federal associations which have principal offices 
in this State, and any investment authorized for 
state-chartered aosociationo savings institutions 
and approved in advance in writing by the Ad- 
ministrator. 

Statutory Authority G.S. 54B-55; 54B-194; 
54C-53; 54C-144. 

.0002 INVESTMENT LIMITATION 

Investments in a service corporation include not 
only stock and other securities of a service cor- 
poration, such as notes, bonds and debentures, 
but also any loans, secured or unsecured, to the 
service corporation. The investment limitation 
established by G.S. 54B-194 and GS_ 54C-144 
applies to the total investment that aft association 
a savings institution can make in one or in any 
number of service corporations, e xcept a» asso 
ciation fftay mak e a A secured loan to a state- 
wide multi-owned service corporation without 
affecting its te» p e rcent of- shall not be included 
in the assets investment limitation. 



Statutory Authority 
54C-53; 54C-144. 



G.S. 54B-55; 54B-194; 



.0003 DEBT LIMITATION FOR WHOLLY- 
OWNED SERVICE CORPORATIONS 

The aggregate amount of secured and unsecured 
debt which a wholly-owned service corporation 
may have outstanding at any one time to the as- 
sociation savings institution and to non- 
stockholders shall not exceed: 



(1) ten times the total of the service corpo- 
ration's net worth and unsecured debt to the 
association; savings institution; or 

(2) twenty times such total if the service cor- 
poration engages solely in originating, in- 
vesting in, selling, purchasing, servicing, or 
otherwise dealing in (including brokerage or 
warehousing) loans, and participations in 
loans, on a prudent basis and secured by real 
estate or hens on mobile homes. 

Statutory Authority G.S. 54B-55; 54B-194; 
54C-53; 54C-144. 

.0006 ESTABLISHMENT OF FINANCE 
SUBSIDIARIES 

Aft association A savings institution may estab- 
lish a finance subsidiary whose sole purpose is to 
issue debt or equity securities that the association 
savings institution is authorized to issue directly 
(or, if the parent association is a mutual associ 
ation, savings institution, would be authorized to 
issue if it converted to the stock form) and to re- 
mit the net proceeds of such issuance to the as- 
sociation, savings institution, subject to the 
provisions of this Subchapter as it relates to fi- 
nance subsidiaries. 

Statutory Authority G.S. 54B-55; 54B-77; 
54B-195; 54C-53; 54C-144; 54C-146. 

.0007 BOARD ACTION REQUIRED 

Prior to the establishment of any subsidiary, the 
Board of Directors of the association savings in- 
stitution shall, by resolution, vote to authorize 
the creation of a finance subsidiary in furtherance 
of a written business plan to reduce interest-rate 
risk and to control credit risk, and shall agree to 
make the books and records of its finance sub- 
sidiary available to the Administrator. The 
Board of Directors shall be responsible for mon- 
itoring the use of all proceeds obtained through 
the issuance of securities by the finance subsid- 
iary and shall ensure compliance with the busi- 
ness plan pursuant to which the finance 
subsidiary was established. 



Statutory Authority G.S. 
54C-53; 54C-/44; 54C-/46. 



54B-55; 54B-195: 



.0008 FINANCE SUBSIDIARY TRANSACTIONS 
WITH PARENT 

(a) A» association A savings institution may 
provide the capital to establish one or more fi- 
nance subsidiaries by transferring assets to one 
or more finance subsidiaries: Provided, that: 
(1) The aggregate book value of all assets 
transferred or made available to finance 
subsidiaries shall not, without the prior 



6:15 NORTH CAROLINA REGISTER November 1. 1991 



997 



PROPOSED RULES 



written approval of the Administrator, 
exceed 30 percent of the book value of the 
association's savings institution's total as- 
sets determined as of the date any assets 
are transferred or made available; 

(2) The aggregate current market value of as- 
sets transferred or made available shall 
not, without the prior written approval of 
the Administrator, exceed the amount 
necessary' and customary for the issuance 
of the type of securities to be issued by the 
subsidiary or 200 percent of the gross 
proceeds resulting from the offerings of 
securities by the finance subsidiary, 
whichever is less; and 

(3) For the purpose of calculating the limita- 
tions set forth in Subparagraphs (1) and 
(2) of Paragraph (a) of this Rule, assets 
which are considered to be transferred or 
made available to a finance subsidiary in- 
clude assets to capitalize the finance sub- 
sidiary, to collateralize a securities offering 
by an established finance subsidiary, to 
maintain collateral levels for any security 
issued by the finance subsidiary, and the 
greater of the face amount of any guaran- 
tee issued by the parent association with 
respect to the obligations of the finance 
subsidiary or the market value of any 
collateral for such guarantee. 

(b) Finance subsidiaries shall not be consol- 
idated with their parent association for the pur- 
poses of calculating the net worth of the 
association, savings institution. 

(c) A-» association A savings institution may 
guarantee any obligation issued to its finance 
subsidiaries: Provided, that the face amount of 
the guarantee shall not exceed the unpaid princi- 
pal balance of the obligation, and provided fur- 
ther, that the guarantee shall provide that the 
resources of the finance subsidiary' issuing the 
obligation shall be exhausted before recourse 
shall be had to the guarantee. Such guarantee 
shall not be considered to be an outstanding loan 
for purposes of loans-to-one-borrower limita- 
tions. If such guarantee is collateralized, the 
greater of the face amount of the guarantee or the 
market value of the collateral shall be included in 
the total amount of assets that may be transferred 
by the parent association subject to the limitation 
of Subparagraphs (1) and (2) of Paragraph (a) of 
this Rule. 

(d) Any funds constituting the capital of an 
off-shore finance subsidiary may be invested in 
liquid assets, a* defined m 4 NCAG +4© Mir 
or in the stock, bonds, debentures, notes, or 
other obligations (including deposit accounts) of 
an affiliate of the parent: association: provided, 
that the earnings from such investments and the 



proceeds of any sale of such investments are 
remitted to the parent, association. 



Statutory Authority G.S. 54B-55; 
54B-195; 54C-53; 54C-144; 54C-146. 



54B-77; 



.0009 ISSUANCE OF SECURITIES BY 
FINANCE SUBSIDIARIES 

(a) A finance subsidiary may issue any security 
which its parent association is authorized to issue 
(or, if the parent association is a mutual associ 
ation, savings institution, would be authorized to 
issue if it converted to the stock form), subject 
to the provisions of this Subchapter as it relates 
to finance subsidiaries. 

(b) A finance subsidiary shall not issue or deal 
in the deposits and savings accounts of its parent. 
association. A finance subsidiary shall not state 
or imply that securities issued by it are insured 
by the insurer of accounts of the parent, associ 
ation. 

(c) A finance subsidiary shall not issue any se- 
curity the payment, maturity, or redemption of 
which may be accelerated upon the condition 
that its parent association is insolvent or has been 
placed into receivership. 

(d) A» association A savings institution provid- 
ing capital to a finance subsidiary shall own 100 
percent of the finance subsidiary's outstanding 
voting common stock and may not transfer or 
otherwise assign any interest in such stock to any 
other person or entity, without the prior written 
approval of the Administrator. 

(e) A finance subsidiary may provide for voting 
rights for holders of preferred stock, under such 
conditions and in such manner and to the extent 
customary to protect the rights of such holders 
of preferred stock, including but not limited to 
the following conditions (except that, upon the 
expiration of any event giving rise to the exercise 
of such voting rights, the voting rights shall be 
vested exclusively as provided in Paragraph (d) 
of this Rule): 

(1) The finance subsidiary fails to pay divi- 
dends for at least one dividend period; 

(2) Any merger, consolidation, or reorganiza- 
tion of the finance subsidiary or its parent 
association (except in a supervisory case) 
is sought to be authorized, where the is- 
suing finance subsidiary or its parent as- 
sociation is not the survivor, provided that 
the net worth of the resulting finance 
subsidiary or parent association available 
for payment of any class of preferred stock 
is less than the net worth available for 
such class prior to the merger, consol- 
idation, or reorganization; 

(3) Action is sought to be authorized which 
would create any class of preferred stock 



998 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



having a preference or priority over an 
outstanding class or classes of preferred 
stock; 

(4) Any action is sought to be authorized 
which would adversely change the specific 
terms of any class of preferred stock; 

(5) Action is sought to be authorized which 
would increase the number of shares of a 
class of preferred stock, or the number of 
shares of a class of preferred stock ranking 
prior to or in parity with another class of 
preferred stock; or 

(6) Action is sought which would authorize 
the issuance of an additional class or 
classes of preferred stock without the fi- 
nance subsidiary having met specific fi- 
nancial standards. 

Statutory Authority G.S. 54B-55; 54B-77; 
54B-195; 54C-53; 54C-144; 54C-146. 

.0010 TRANSFER OF PROCEEDS 

All proceeds from the issuance of any security 
by a finance subsidiary, net of the reasonable 
costs associated with the issuance of the securities 
and the organization of the finance subsidiary, 
shall be remitted to the finance subsidiary's par- 
ent, association. 

Statutory Authority G.S. 54B-55; 54B-77; 
54B-195; 54C-53; 54C-144; 54C-146. 

.001 1 HOLDING COMPANY SUBSIDIARIES 
AND FINANCE SUBSIDIARIES 

(a) Pef purposes ef- Soction 108(d) ef the Na- 
tional Housing Aet (+3 U.S.C. Soction 1730a(d)], 
if If the parent association is a subsidiary of a 
holding company, the finance subsidiary shall not 
be considered to be an affiliate of its parent, as- 
sociation. 

(b) A finance subsidiary shall make no invest- 
ment in, or loan, discount, or extension of credit 
to, its parent association without the prior writ- 
ten approval of the Administrator, except as 
provided in this Subchapter as it relates to fi- 
nance subsidiaries. 

(c) If the parent association is a subsidiary of 
a holding company, a finance subsidiary shall 
make no investment in, or loan, discount or ex- 
tension of credit to, any affiliate of its parent, a&- 
sociation, except as provided in Paragraph (d) of 
Rule .0008 of this Subchapter, without the prior 
written approval of the Administrator. 

Statutory Authority G.S. 54B-55; 54B-77; 
54B-195; 54C-53; 54C-144; 54C-I46. 

.0012 NOTIFICATION TO THE 
ADMINISTRATOR 



(a) Prior to the establishment of any finance 
subsidiary, or prior to any transfer of assets to an 
existing finance subsidiary, the Board of Direc- 
tors of the aosooiation savings institution shall 
send written notification to the Administrator, 
specifying: 

(1) the name of the finance subsidiary; 

(2) the amount of assets (market and book 
value as of date within 30 days) to be 
transferred or made available (including 
the terms of any guarantee to be issued 
by the association savings institution or 
any affiliate of the association savings in- 
stitution) , the book value of all assets 
previously transferred or made available, 
and the amount representing 30 percent 
of the book value of the paront associ 
ation's parent's total assets as of such 
date; 

(3) when known and to the extent permitted 
by the Securities Act of 1933: 

(A) a description of the securities to be is- 
sued, including the term thereof; 

(B) the aggregate amount of the offer; 

(C) the anticipated interest or dividend rates 
and yields or the range thereof, and the 
frequency of payments; 

(D) the rninimum denomination of the se- 
curities; and 

(E) where the subsidiary intends to market 
the securities. 

(b) Within ten days after the issuance of any 
security, a finance subsidiary shall notify, in 
writing, the Administrator and shall provide to 
the Administrator a copy of any prospectus, of- 
fering circular, or other similar document con- 
cerning an issuance. 

Statutory Authority G.S. 54B-55; 54B-77; 
54B-195; 54C-53; 54C-144; 54C-146. 

SUBCHAPTER 16H - SUPERVISORY ACTIONS 

.0001 DEFINITIONS 

As used in this Subchapter, unless the context 
otherwise requires, the term: 

(1) "Association" "Savings institution" means 
all associations savings institutions convert- 
ing, merging or consolidating pursuant to 
G.S. 54B-44 or OS. 54C-45 and this Sub- 
chapter. 

(2) "Consolidation" means a supervisory con- 
solidation pursuant to G.S. 54B-44 or G.S. 
54C-45 and this Subchapter. 

(3) "Merger" means a supervisory merger pur- 
suant to G.S. 54B-44 or OS_. 54C-45 and 
this Subchapter. 

(4) "Plan of conversion" means a detailed 
outline of the terms, conditions and proce- 



6:15 NORTH CAROLINA REGISTER November I, 1991 



999 



PROPOSED RULES 



dure of the short form conversion of a» as- 
sociation a savings institution from mutual 
to stock form of ownership. 
(5) "Plan of merger" or "plan of 

consolidation" means a detailed outline of 
the terms, conditions and procedure of 
combining one association, savings institu- 
tion, by merger or consolidation, with an- 
other association, savings institution. 



(6) "Short form conversion" means a supervi- 
sory conversion of a» association a savings 
institution from mutual to stock form of 
ownership, pursuant to G.S. 54B-44 or G.S. 
54C-45 and this Subchapter. 

(7) "Combination merger and conversion" 
mean a supervisory conversion of aft associ 
ation a savings institution from mutual to 
stock form of ownership combined with a 
supervisory merger, pursuant to G.S. 54B-44 
or G.S. 54C-45 and this Subchapter. 

(8) "Flan of combination merger and conver- 
sion" means a detailed outline of the terms, 
conditions and procedures of the short form 
conversion of a» association a savings insti- 
tution from mutual to stock form of owner- Statutory Authority G.S. 54B-44; 54C-45. 
ship and combining the association, savings 
institution, bv merger, with another associ 



.0005 APPROVAL BY ADMINISTRATOR 

The association savings institution shall submit 
to the Administrator for his review a certified 
copy of the association's savings institution's new 
certificate of incorporation, articles of merger or 
consolidation or evidence of such other action as 
the Administrator deems appropriate. Upon 
finding that all requirements of the short form 
conversion, merger, consolidation, combination 
merger and conversion or other action have been 
satisfied, the Administrator shall certify to the 
Secretary of State that he has approved the cer- 
tificate of incorporation, articles of merger or 
consolidation or evidence of other action for fil- 
ing in the Office of the Secretary of State. a»4 
the office) e£ the register ef doods »£ the county » 
which the principal offico »f the association is 
looatod. Upon such filing a»d recording, the 
rights a»4 obligations ef- the association a»4 its 
members &f stoclcholders shall be set forth m 
G.S. 51 B 35(5), with regard t» a merger »f con 
solidation, aftd G.S. 51 B 33(e) with regard t» a 
short form conversion. 



ation. savings institution. 
Statutory Authority G.S. 54B-44; 54C-45. 

.0002 GROUNDS 

Upon making a finding that a» association a 
savings institution is unable to operate in a safe 
and sound manner, the Administrator may au- 
thorize or require a short form merger, consol- 
idation, conversion, or combination merger and 
conversion of such association savings institution 
or any other action the Administrator deems ap- 
propriate. 

Statutory Authority G.S. 54B-44; 54C-45. 

.0003 NOTICE TO SAVINGS INSTITUTION 

The Administrator shall give written notice to 
the Board of Directors of a» association a savings 
institution as to which a finding is made pursuant 
to Rule .0002 of this Subchapter. Such notice 
shall set forth the basis for such finding and shall 
authorize or require the Board of Directors to 
adopt a plan of conversion, a plan of merger or 
consolidation, a plan of combination merger and 
conversion with another association savings in- 
stitution or any other action specified by the 
Administrator. The Administrator may specify 
provisions which shall be included in the plan. 

Statutory Authority G.S. 54B-44; 54C-45. 



.0006 SHORT FORM MUTUAL TO STOCK 
CONVERSION 

In the case of a short form mutual to stock 
conversion, the Administrator shall approve the 
mariner in which the appraisal shall be con- 
ducted; the manner in which shares of conversion 
stock shall be offered; and the requirements for 
completion of the short form conversion from 
mutual to stock form. 

Statutory Authority G.S. 54B-44; 54C-45. 

.0007 LIQUIDATION ACCOUNT 

The Administrator may require that a plan of 
conversion, merger, consolidation or any other 
action provide for a liquidation account for the 
benefit of the withdrawable account holders of a 
converting mutual association savings institution 
or a mutual association savings institution which 
will not be the surviving association savings in- 
stitution pursuant to a merger or consolidation 
or any other action. 

Statutory Authority G.S. 54B-44; 54C-45. 

.0008 WAIVER 

The Administrator may waive or alter any re- 
quirements set forth in this Subchapter to pro- 
mote the best interests of the public or the 
association, savings institution. 

Statutory Authority G.S. 54B-44; 54C-45. 



1000 



6:15 NORTH CAROLINA REGISTER November I, 1991 



PROPOSED RULES 



SUBCHAPTER 161 - ACQUISITION OF 
CONTROL 

SECTION .0700 - GENERAL 

.0702 DEFINITIONS AND OTHER TERMS 

As used in this Subchapter, unless the context 
otherwise requires, the term: 

(1) "Acquisition" means a transaction in which 
a person or savings aa4 loan holding com- 
pany acquires control of a stock association 
savings institution by means of an exchange 
of its capital stock for the capital stock of the 
stock association, savings institution, or by 
means of a purchase of the capital stock of 
the stock association, savings institution. 

(2) "Applicant" means a person or savings a&4 
loan holding company which has filed with 
the Administrator any application under this 
Subchapter. 

(4$ "Control" moans the powor, diroctly ©f m- 
diroctly, t© direct the managomont ©f poli 
eiee ©£ a» association ©f t© voto 2$ porcont 
©f moro ©f afty- class ©f- voting socuritios fef 
a© association. 

(3) (4} "Person" means an individual or group 
of individuals acting in concert, a corpo- 
ration, trust, joint venture, pool, syndicate, 
sole proprietorship, unincorporated organ- 
ization, or any other form of entity not spe- 
cifically listed in this Subdivision. 

(4) (4} "Plan of Conversion" means a plan duly 
adopted in accordance with the requirements 
of G.S. 54B-26I or OS. 54C-195 and this 
Subchapter that, to the satisfaction of the 
Administrator, sets out all relevant terms 
and conditions pertaining to a mutual assb 
oiation's savings institution's reorganization 
of its ownership to provide for ownership 
by a savings aft© l©a» holding company. 

(5) (4) "Plan of Reorganization" means a plan 
duly adopted in accordance with the re- 
quirements of G.S. 54B-261 or 54C-195 and 
this Subchapter that, to the satisfaction of 
the Administrator, sets out all relevant terms 
and conditions pertaining to a stock associ 
ation'o savings institution's reorganization 
of its ownership to provide for ownership 
by a savings aft© loan holding company. 

(6) (4) "Registrant" means any savings a«4 loan 
holding company which has filed a registra- 
tion statement with the Administrator under 
this Subchapter. 

(7) f&) "Savings a«d Loan Holding Company" 
"Holding Company" means any company 
which directly or indirectly controls a» as- 
sociation a savings institution or controls 
any other company which is a savings a«4 
l©a» holding company of a savings institu- 
tion. 



(8) (9) "Tax Free Exchange" means an ex- 
change of stock which would result in no tax 
consequences to the savings a«4 loan hold- 
ing company, the stock association savings 
institution and its stockholders under state 
or federal law. 

Statutory Authority G.S. 54B-55; 54B-261; 
54B-262; 54C-53; 54C-195; 54C-196. 

.0703 STANDARDS FOR APPROVAL OF 

ACQUISITION: DUTIES AND CONDUCT 

(a) A» association A savings institution may be 
controlled by a person or a savings aftd loan 
holding company. The Administrator shall de- 
termine that the person or savings and loan 
holding company is qualified by character, expe- 
rience, and financial responsibility to control the 
association savings institution in a legal and re- 
sponsible manner. The Administrator shall 
consider the applicant's financial and managerial 
resources, and the organizational structure and 
future prospects and plans of both the applicant 



and the association. 



The 



Administrator will consider whether the business 
and activities of the applicant, or its officers and 
directors, or any other person controlling, con- 
trolled by, or associated with the applicant by 
having a common controller, would create a 
material deterioration of confidence in the safety, 
soundness, and financial integrity of the associ 
ation proposed to be controlled. When reference 
is made to the word "control" in this Rule, the 
word "control" has the meaning given in Piulo 
Jm2 ©f this Subchapter, G.S. 54B-4 or G.S. 
54C-4, and additionally shall have the meaning 
given by any other law or regulation under which 
the applicant is required to report and register as 
a holding company, parent corporation, or other 
similar entity. 

(b) An applicant shall be solvent, and shall 
have a debt-to-equity ratio which compares fa- 
vorably with the ratios of other persons in the 
same line of business. 

(c) The approval of an application to acquire 
control of a» association a savings institution 
shall in no way diminish the authority of the 
Administrator to regulate the activities of the 
controlled association, savings institution. 

(d) A controlled association savings institution 
shall not lend to, or invest in, its holding com- 
pany or its affiliates, without the prior written 
approval of the Administrator. 

Statutory Authority G.S. 54B-43; 54B-55; 
54B-261; 54B-262; 54C-53; 54C-J95; 54C-196. 

.0704 INVESTMENT ACTIVITIES OF 
HOLDING COMPANIES 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1001 



PROPOSED RULES 



A savings aft4 leas- holding company may invest 
only in the stock of one or more stock associ 
ationo, savings institutions, deposits in financial 
institutions the principal offices of which are lo- 
cated in North Carolina, investments permitted 
by G.S. 54B-181 through -184, and -187 through 
- 1 90 and Article 7 of Chapter 54C of the General 
Statutes, and such other investments approved in 
advance in writing by the Administrator. In no 
event shall a savings af»4 lea» institution holding 
company make any investment not specified by 
this Section or not permitted for a» association 
a savings institution under the supervision of the 
Administrator. 

Statutory Authority G.S. 54B-55; 54B-261; 
54B-262; 54C-53; 54C-195; 54C-J96. 

SECTION .0800 - ACQUISITIONS 

.0801 PRIOR WRITTEN APPROVAL 

REQUIRED FOR ACQUISITIONS 

(a) A person or savings aft4 loan holding 
company shall not acquire control of any associ 
ation savings institution without having filed with 
the Administrator an Acquisition Application as 
prescribed by the Administrator, and without the 
written approval of the Administrator after con- 
sideration of the application and any amend- 
ments thereto. 

(b) In addition to the filing of the Acquisition 
Application, the applicant shall file any other in- 
formation requested by the Administrator, in- 
cluding copies of any filings, documents or 
reports mentioned in Rule .1105 of this Sub- 
chapter. 

Statutory Authority G.S. 54B-55; 54B-261; 
54B-262; 54C-53; 54C-195; 54C-196. 

.0803 CONFIDENTIAL INFORMATION 

Should an applicant desire to submit any infor- 
mation it deems to be of a confidential nature 
regarding the answer to any item or a part of an 
exhibit included in any application for filing un- 
der this Subchapter, such information pertaining 
to such item or exhibit shall be separately bound 
and labeled "confidential", and a statement shall 
be submitted therewith briefly setting forth the 
grounds on which such information should be 
treated as confidential. Only general reference 
thereto need be made in that portion of the ap- 
plication which the applicant deems not to be 
confidential. Applications for filings under this 
Subchapter shall be made available for inspection 
by the public, except for portions which are 
bound and labeled "confidential" and which the 
Administrator determines to withhold from pub- 
lic availabilitv because of their confidential nature 



under the provisions of G.S. 54B-63 or 54C-60 
unless the Administrator is compelled to release 
the information pursuant to G.S. 54B-63 or 
54C-60. 

Statutory Authority G.S. 54B-55; 54B-63; 
54B-261; 54B-262; 54C-53; 54C-60; 54C-/95; 
54C-196. 

SECTION .0900 - REORGANIZING STOCK 
ASSOCIATION INTO HOLDING COMPANY 

.0901 REQUIRED ACQUISITION 
APPLICATION 

A stock association savings institution may be 
controlled by a savings a«4 lea« holding com- 
pany by means of a plan of reorganization. This 
may be accomplished by filing with the Admin- 
istrator one manually signed a»4 »«e conformed 
copy of an Acquisition Application. For the 
purposes of filing the application, the applicant 
shall be considered a holding company, even 
though it may not yet control a stock association. 
savings institution. 

Statutory Authority G.S. 54B-55; 54B-261; 
54B-262; 54C-53; 54C-195; 54C-196. 

.0902 ACQUISITION PROCEDURE 

(a) Upon determining that an Acquisition Ap- 
plication is properly executed and is not mate- 
rially incomplete, the Administrator shall 
consider the application filed. If the Plan of 
Reorganization is not approved, the Administra- 
tor shall notify the applicant of such, and state 
the reasons for its disapproval. The Administra- 
tor may include advice to the applicant as to 
what may be required by way of amendment or 
other requirement to cause approval of the Plan 
of Reorganization. 

(b) If the Administrator approves the Plan of 
Reorganization, the applicant shall be notified. 
Thereafter, a regular or special meeting of the 
stockholders of the subject association savings 
institution shall be called after advance written 
notice to the stockholders of not less than 20 
days specifying the time, place, and purpose for 
calling of the meeting. Notice shall be published 
in one or more newspapers of general circulation 
in the county or counties where the association 
savings institution has its principal office and 
branch office) s). The applicant shall file pub- 
lisher's affidavits with the Administrator to con- 
firm the publication of notice. 

(c) The results of the stockholder's meeting 
shall be confirmed to the Administrator by filing 
attested minutes of the meeting. If the stock- 
holders approve reorganization of ownership of 
the association savings institution to provide for 
ownership by a savings a«4 loan holding com- 



1002 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



pany, the Administrator shall enter his final order 
approving the reorganization, 
(d) The Administrator may waive or alter, for 
good cause, any requirements set forth in this 
Rule. 



Statutory Authority G.S. 54B-55; 
54B-262; 54C-53; 54C-195; 54C-I96. 



54B-261; 



SECTION .1000 - ACQUISITIONS OF STOCK 
ASSOCIATIONS 

.1001 REQUIRED ACQUISITION 
APPLICATIONS 

A person seeking to acquire control of any stock 
association savings institution shall file with the 
Administrator one manually signed a»4 »h# 
conformed copy of an Acquisition Application. 



Statutory Authority G.S. 54B-55; 
54B-262; 54C-53; 54C-J95; 54C-196. 



54B-261; 



.1002 FOREIGN APPLICANTS 

(a) If the applicant is a corporation for profit 
or having a capital stock, but not created under 
any general or special act of the State of North 
Carolina, then that corporation shall procure a 
Certificate of Authority from the Secretary of 
State under the provisions of Article 4£ 15 of 
Chapter 55 of the North Carolina General Stat- 
utes, before it shall be approved by the Admin- 
istrator to obtain control of a stock association. 
savings institution. The applicant shall file a 
copy of the Certificate of Authority from the 
Secretary of State to evidence this. If the appli- 
cant foreign corporation has been certified to 
conduct business in this State under some pro- 
vision of law of this State other than Chapter 55 
of the General Statutes, then evidence of that 
certification shall be filed with the Administrator 
for his review and approval to meet the require- 
ments of this Rule. 

(b) If the applicant is a person other than a 
corporation, and not a resident of this State, then 
the applicant shall by a duly executed instrument 
filed with the Administrator, constitute as its true 
and lawful attorney the Secretary of State and his 
successors in office, or some other competent 
resident of this State, upon whom all original 
process in any action or legal proceedings against 
it may be served, and therein shall agree that any 
original process against it which may be served 
upon the Secretary of State or other competent 
person, shall be of the same force and validity as 
if served on the person, and the authority thereof 
shall continue in force irrevocable so long as the 
person continues to control a state association. 
savings institution. 

Statutory Authority G.S. 54B-55; 54C-53. 



.1003 ACQUISITION PROCEDURE 

(a) Upon determining that an Acquisition Ap- 
plication GP is properly executed and is not 
materially incomplete, the Administrator shall 
consider its approval. If the application is not 
approved, the Administrator will notify the ap- 
plicant of such, and state the reasons for its dis- 
approval. The Administrator may include advice 
to the applicant as to what may be required by 
way of amendment or other requirement, to 
cause approval of the application. 

(b) if the Administrator approves the applica- 
tion, the applicant shall be notified. Such notice 
shall include any requirements or stipulations the 
Administrator may make as conditions of ap- 
proval. 

(c) The Administrator may waive or alter, for 
good cause, any requirements set forth in this 
Rule. 



Statutory Authority G.S. 54B-55; 
54B-262; 54C-53; 54C-195; 54C-196. 



54B-261; 



SECTION .1100 - REGISTRATION: 

SUPERVISION: REPORTS: FILINGS: BOOKS 

AND RECORDS 

.1101 REGISTRATION 

(a) Not later than ten business days after be- 
coming a savings a*4 loan holding company, 
each savings a*4 loan holding company shall 
register with the Administrator by filing a Regis- 
tration Statement. 

(b) The Administrator may at any time, upon 
his own motion or otherwise, release a holding 
company from registration, if the Administrator 
determines that such company or person no 
longer controls a stock association, savings in- 
stitution. 

Statutory Authority G.S. 54B-55: 54B-26I; 
54B-262; 54C-53; 54C-195; 54C-I96. 

.1102 SUPERVISION 

(a) Officers, directors, and employees of savings 
aft4 loan holding companies have the same duties 
and responsibilities, express or implied, as offi- 
cers, directors, and employees of associations. 
savings institutions. 

(b) Each registrant shall be subject to such ex- 
aminations as the Administrator may prescribe. 
The cost of such examinations shall be assessed 
against and paid by such registrant. 

Statutory Authority G.S. 54B-55; 54B-57; 
54B-261; 54B-262; 54C-53; 54C-195; 54C-196. 

.1104 FILING AND APPROVAL: 

AMENDMENTS TO ARTICLES 



6:15 NORTH CAROLINA REGISTER November I, 1991 



1003 



PROPOSED RULES 



AND BYLAWS 

(a) Prior to any filing with the Secretary of 
State of the State of North Carolina, a holding 
company will file with the Administrator copies 
of any proposed amendment to its articles of in- 
corporation. The Administrator must give his 
approval to the content and form of such pro- 
posed amendments. 

(b) Before any amendments to the bylaws of a 
savings aad loan holding company can become 
effective, a certified copy of such amendments 
shall be filed with and approved by the Admin- 
istrator. In the event of the failure of the Ad- 
ministrator to act upon the amendment within 
25 days of receipt, the bylaws shall be deemed 
approved. 



Statutory Authority G.S. 54B-55; 
54B-262; 54C-53; 54C-195; 54C-I96. 



54 B- 26 1; 



.1105 REPORTS 

(a) Each registrant shall file simultaneously 
with the Administrator copies of any filings, 
documents, statements or reports required to be 
filed with the appropriate federal regulatory au- 
thority. 

(b) Each registrant shall file with the Adminis- 
trator such reports or other filings as the Ad- 
ministrator may prescribe, to be made under oath 
or otherwise, and to be in such form and for such 
periods as the Administrator may prescribe. 
Each such report of filing shall contain such in- 
formation concerning the operations of the 
savings aft4 loan holding company, and any re- 
lated persons, as the Administrator may require. 



Statutory Authority G.S. 54B-55; 
54B-262; 54C-53; 54C-195; 54C-196. 



54B-261; 



.1106 BOOKS AND RECORDS 

In addition to general corporate records main- 
tained in the ordinary course of business as re- 
quired by Section +4» mm Sections 16D .0300 
and U'K .03011 of this Chapter, each registrant 
shall maintain such books and records in such 
form as may be prescribed by the Administrator. 
The books and records of a controlled aosoci 
ation savings institution or its holding company 
shall not be removed from this State without the 
prior written approval of the Administrator. 

Statutory Authority G.S. 54B-55; 54B-26J; 
54B-262; 54C-53; 54C-/95; 54C-196. 

SECTION .1200 - CONVERSION OF MUTUAL 
ASSOCIATION INTO HOLDING COMPANY 

.1201 REQUIRED ACQUISITION 
APPLICATION 



When it is proposed that a mutual association 
savings institution shall convert to a savings a«4 
lot» holding company by means of a plan of 
conversion, the mutual association savings insti- 
tution shall file with the Administrator one 
manually signed a«4 e«e conformod copy of an 
Acquisition Application. 

Statutory Authority G.S. 54B-55; 54B-26I; 
54B-262; 54C-53; 54C-195; 54C-196. 

.1202 CONVERSION PROCEDURE 

(a) Upon determining that an Acquisition Ap- 
plication is properly executed and is not mate- 
rially incomplete, the Administrator shall 
consider the application filed. If the Plan of 
Conversion is not approved, the Administrator 
shall notify the applicant of such, and state the 
reasons for its disapproval. The Administrator 
may include advice to the applicant as to what 
may be required by way of amendment or other 
requirement, to cause approval of the Plan of 
Conversion. 

(b) If the Administrator approves the Plan of 
Conversion, the applicant shall be notified. 
Thereafter, a regular or special meeting of the 
members of the subject association savings insti- 
tution shall be called after advance written notice 
to the members of not less than 20 days specify- 
ing the time, place and purpose for calling of the 
meeting. Notice shall be published in one or 
more newspapers of general circulation in the 
county or counties where the association savings 
institution has its principal office and branch 
office(s). The applicant shall file publisher's af- 
fidavits with the Administrator to confirm publi- 
cation of notice. 

(c) The results of the member's meeting shall 
be confirmed to the Administrator by filing at- 
tested minutes of the meeting. If the members 
approve conversion of the association savings 
institution to a mutual holding company, the 
Administrator shall enter his final order approv- 
ing the conversion. 

(d) The Administrator may waive or alter, for 
good cause, anv requirements set forth in this 
Rule. 

Statutory Authority G.S. 54B-S5; 54B-26I; 
54B-262; 54C-53; 54C-195; 54C-J96. 

.1203 PLAN OF CONVERSION 
REQUIREMENTS 

(a) The plan of conversion to a mutual holding 
company shall require the chartering of a stock 
subsidiary. At least 51 percent of the stock of 
this subsidiary shall be owned by the mutual 
holding company. 



1004 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



(b) Share of the stock subsidiary may be issued 
to the holding company only after sufficient as- 
sets to match transferred deposit liabilities are 
transferred by the holding company to the stock 
subsidiary and only after written confirmation of 
continuation of insurance of accounts for the 
stock subsidiary is received from the federal 
insurer of accounts. 

(c) Upon completion of the conversion, the 
mutual association savings institution shall be- 
come a mutual holding company and shall cease 
to be a» association a savings institution or de- 
pository institution of any type. 



Statutory A uthority 
54C-53; 54C-195. 



G.S. 54B-55; 54B-262; 



SECTION 



1300 - HOLDING COMPANY 
ACQUISITIONS 



.1301 



REQUIRED ACQUISITION 
APPLICATION 

A person seeking to acquire control of any 
holding company shall file with the Administra- 
tor e» one manually signed aad e»e conformed 
copy of an Acquisition Application. 



Statutory A uthority 
54C-53; 54C-195. 



G.S. 54B-55; 54B-262; 



SUBCHAPTER 16J - MERGER OF STATE AND 
FEDERAL ASSOCIATIONS 

.0001 MERGER OF A STATE INSTITUTION 
INTO A FEDERAL INSTITUTION 

The procedure to effect a merger where a state 
association savings institution is merged into a 
federal association depository institution shall be 
as follows: 

institution or savings institutions shall com- 
ply with subsoctions (4|t f^)r (^ a*^ H) e£ 
G.S. 54 B 35 r e lativ e to the merger agroo 
mont, the special mooting ef- members e* 
stockholders te consider the merger agre e 
mont, the notic e r e quir e ments ef the spocial 
mooting, the requisite vote fof mombor ef 
stockholder approval, af*4 the proper filings 
with the Administrator ef the result a ef the 
sp e cial mooting. ¥he notice as required by 
G.S. 54 B 35(3) » addition te specifying the 
time, placo sr4 purpos e fof the special the 
merger procedure established in G.S. 54B-35 
and 54C-35. The notice for the meeting of 
the members or stockholders shall also state 
that if the merger is approved by the mem- 
bers or stockholders and the proper regula- 
tory authorities then the surviving 
association institution will be a federally 



chartered association institution subject to 
federal law and regulation. 

(2) The state association or associations in- 
volved shall also comply with any applicable 
provisions of federal law and regulation re- 
garding mergers. 

(4) ¥he fodoral association ef associations is- 
volvod shell comply with the provisions ef 
fodoral law an4 i 

Statutory Authority G.S. 54B-39; 54C-39. 

.0002 MERGER OF A FEDERAL INSTITUTION 
INTO A STATE INSTITUTION 

The procedure to effect a merger when a federal 
association depository institution is merging into 
a state association savings institution shall be as 
follows: 

(1) The federal association ef associations in- 
stitution or institutions involved shall com- 
ply with the provisions of federal law and 
regulation regarding mergers. 

(2) The state association ef associations insti- 
tution or institutions involved shall comply 
with the provisions of G.S. 54B-35 or 
54C-35 for the merger of state associations. 
savings institutions. 

Statutory Authority G.S. 54B-39; 54C-39. 

.0003 WAIVER 

The Administrator may waive or alter any or 
all of the requirements set forth in this Subchap- 
ter upon finding that such waiver would be in the 
best interest of the members or stockholders of 
the merging associations depository institutions 
consistent with G.S. 54B-35 (6)7 or 54C-35. 

Statutory Authority G.S. 54B-39; 54C-39. 

SUBCHAPTER 16K - TRUST POWERS 

.0001 DEFINITIONS 

For purposes of this Section: 

(1) 'Account" means the trust, estate or other 
fiduciary relationship which has been estab- 
lished with a» association, a savings insti- 
tution. 

(-3) "Association" m e ans a state chartered 

UU J U IC3 CnTa RRO ™ CT^^^C LIU C^^TT ^^^^^TOT^TT^ til IUI.I 

the provisions ef Chapter -S4& ef the North 
Carolina General Statutos. 

(2) (3) "Custodian Under the Uniform Gifts 
Transfers to Minors Act" means an account 
established pursuant to the North Carolina 
Uniform Gifts Transfers to Minors Act 
contained in Article 4-3 ef Chapter 34 
Chapter 33 A of the North Carolina General 
Statutes. 



6:15 NORTH CAROLINA REGISTER November I, 1991 



1005 



PROPOSED RULES 



(3) (4) "Fiduciary" means a» aooociation a 
savings institution undertaking to act alone 
or jointly with others, primarily for the 
benefit of another in all matters connected 
with its undertaking and includes trustee, 
executor, administrator, guardian, receiver, 
managing agent, registrar of stocks and 
bonds, escrow, transfer, or paying agent, 
trustee of employee pension, welfare and 
profit sharing trusts, and any other similar 
capacity. 

(4) (4) "Fiduciary Records" means all matters 
which are written, transcribed, recorded, re- 
ceived or otherwise coming into the pos- 
session of a» aooociation a savings institution 
and are necessary to preserve information 
concerning the actions and events relevant 
to the fiduciary activities of the aooociation. 
savings institution. 

(5) f4f "Guardian" means the guardian, 
conservator, or committee of the estate of 
an infant, an incompetent individual, or a 
competent individual over whose estate a 
court has taken jurisdiction, other than un- 
der bankruptcy or insolvency laws. 

(6) Iffy "Investment Authority" means the re- 
sponsibility conferred by action of law or a 
provision of an appropriate governing in- 
strument to make, select or change invest- 
ments, review investment decisions made by 
others, or to provide investment advice or 
counsel to others. 

(7) (-&} ".Managing Agent" means the fiduciary 
relationship assumed by a» aooociation a 
savings institution upon the creation of an 
account which names the aooociation savings 
institution as agent and confers investment 
discretion upon the aooociation. savings in- 
stitution. 

(8) Iffy "Trust Department" means that group 
or groups of officers and employees of a» 
association a savings institution to whom are 
assigned the performance of fiduciary ser- 
vices by the association, savings institution. 



(b) In addition to any other facts or circum- 
stances, the Administrator, in passing upon an 
application to exercise trust powers, will consider 
the following: 

( 1 ) the financial condition of the aooociation, 
savings institution, provided that in no 
event shall trust powers be granted to a» 
aooociation a savings institution if its fi- 
nancial condition is such that the aosoci 
ation savings institution does not meet the 
requirements of G-£r 51B 216; the appro- 
priate federal regulatory authority; 

(2) the general character and ability of the 
management of the aooociation; savings 
institution; 

(3) the nature of the supervision to be given 
to the fiduciary activities; including the 
qualifications, experience and character of 
the proposed officer or officers of the trust 
department; and 

(4) whether the aooociation savings institution 
has available legal counsel to advise and 
pass upon fiduciary matters when neces- 
sary. 

(c) Approval by the Administrator of an ap- 
plication under this Section authorizes the appli- 
cant to exercise only those trust powers specified 
in the approval. Unless otherwise provided by 
the approval, fiduciary services based on those 
trust powers may be offered only in those offices 
listed in the application. 

Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-146. 

.0003 CONSOLIDATION OR MERGER OF 
TWO OR MORE SAVINGS 
INSTITUTIONS 

When two or more aooooiationo savings insti- 



(9) Ifffy "Trust Powers" means the power to act 
in any fiduciary capacity authorized under 
this Section. 



tutions consolidate or merge, and any one of 
such aooooiationo savings institutions has, prior 
to such consolidation or merger, received ap- 
proval from the Administrator to exercise trust 
powers which approval is in force at the time of 
the consolidation or merger, the rights existing 
under such approval pass to the resulting aosoci 
ation savings institution as provided in G.S. 
36A-37 for other corporate trustees. 



Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-146. 



Statutory Authority G.S. 
54C-53; 54C-146. 



54B-55; 54B-77; 



.0002 APPLICATIONS 

(a) A» aooociation A savings institution desiring 
to exercise fiduciary powers shall file with the 
Administrator an application indicating which 
trust services it wishes to offer and providing the 
information necessary to make the determi- 
nations under Paragraph (b) of this Rule. 



.0004 ADMINISTRATION OF TRLST POWERS 

(a) The Board of Directors is responsible for 
the proper exercise of fiduciary powers by the 
association. savings institution. All matters 
pertinent thereto, including the determination of 
policies, the investment and disposition of prop- 
erty held in a fiduciary capacity, and the direction 



1006 



6.15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



and review of the actions of all officers, employ- 
ees, and committees utilized by the association 
savings institution in the exercise of its fiduciary 
powers, are the responsibility of the Board. In 
discharging this responsibility, the Board of Di- 
rectors may assign, by action duly entered in the 
minutes, the administration of such of the asoo 
ciation's savings institution's trust powers as it 
may consider proper to assign, to such directors, 
officers, employees, or committees as it may 
designate. 

(b) No fiduciary account shall be accepted 
without the prior approval of the Board, or of the 
directors, officers, or committees to whom the 
Board may have assigned the performance of that 
responsibility. A written record shall be made 
of such acceptances and of the relinquishment 
or closing out of all fiduciary accounts. Upon 
the acceptance of an account for which the asoo 
ciation savings institution has investment re- 
sponsibilities, a prompt review of the assets shall 
be made. The Board shall also ensure that at 
least once during every calendar year thereafter, 
and within 15 months of the last review, all the 
assets in each fiduciary account for which the 
asoo ciation savings institution has investment re- 
sponsibilities are reviewed to determine the 
advisability of retaining or disposing of such as- 
sets. The Board of Directors shall act to ensure 
that all investments have been made in accord- 
ance with the terms and purposes of the govern- 
ing instrument. 

(c) The trust department may utilize personnel 
and facilities of other departments of the aoooci 
ation, savings institution, and other departments 
of the association savings institution may utilize 
personnel and facilities of the trust department 
only to the extent not prohibited by law. 

(d) Every association savings institution exer- 
cising trust powers shall adopt written policies 
and procedures to ensure that the federal securi- 
ties laws are complied with in connection with 
any decision or recommendation to purchase or 
sell any security. Such policies and procedures, 
in particular, shall ensure that the association's 
savings institution's trust department shall not 
use material inside information in connection 
with any decision or recommendation to pur- 
chase or sell any security. 

(e) Every association savings institution exer- 
cising fiduciary powers shall designate, employ, 
or retain legal counsel who shall be readily avail- 
able to pass upon fiduciary matters and to advise 
the association savings institution and its trust 
department. 

(f) The directors, officers, and employees of a» 
association a savings institution engaged in the 
operation of a trust department shall acquire 



such additional bond coverage as the Adminis- 
trator may require. 

Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-146. 

.0005 BOOKS AND ACCOUNTS 

(a) Every association savings institution exer- 
cising trust powers shall keep its fiduciary records 
separate and distinct from other records of the 
association, savings institution. All fiduciary 
records shall be 6e k e pt and retained in a manner 
and for such time as is necessary to enable the 
association savings institution to furnish such any 
information or reports with roopoot thoroto as 
may be required by the Administrator. The 
fiduciary records shall contain full information 
relative to each account. 

(b) Every association savings institution shall 
keep an adequate record of all pending litigation 
to which it is a party in connection with its ex- 
ercise of trust powers. 

Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-146. 

.0006 AUDIT OF TRUST DEPARTMENT 

At least once during each calendar year, the as- 
sooiation's savings institution's trust department 
shall be audited by independent auditors. A 
copy of the report of the audit shall be promptly 
filed with the Administrator. 

Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-146. 

.0007 FUNDS AWAITING INVESTMENT OR 
DISTRIBUTION 

(a) Funds held » a fiduciary capacity by a» 
association awaiting investment e* distribution 

^J^^^ll fi fit r --• * t^^^^^A iif\>r\* r t.f l.t ^^£ i i * i . 1 i . f r^i I •> I 1 t ■ fc. 1 ^^^^^ 

TtTTCTTT I IT^fl \^J 1 T^-i\l TJ 1 1 1 1 1 T C^R \-TJ tTI UIIV11 Jll I l.'U l\_U HI 1 T 

longer that- is reasonable fof the proper manage 
mont ©f- the account. 

(a) (b) Funds held in trust by a» association, a 
savings institution, including managing agency 
accounts, awaiting investment or distribution 
may, unless prohibited by the instrument creating 
the trust, be deposited in other departments of 
the association, savings institution, provided the 
association savings institution shall first set aside 
under control of the trust department collateral 
security of a kind and in an amount as specified 
in G.S. 36A-63(b) for funds held in trust by a 
bank, except that no such collateral shall be re- 
quired to the extent that such funds are insured 
by an agency of the United States government. 

(b) (e) Any funds held by a» association a 
savings institution as fiduciary awaiting invest- 
ment or distribution and deposited in other de- 



6:15 NORTH CAROLINA REGISTER November I, 1991 



1007 



PROPOSED RULES 



partments of the aooociation savings institution 
shall be made productive. 

Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-146. 

.0008 INVESTMENT OF FUNDS HELD AS 
FIDUCIARY 

(a) Funds held by a» aooociation a savings in- 
stitution in a fiduciary capacity shall be invested 
in accordance with the instrument establishing 
the fiduciary relationship. When such instru- 
ment does not specify the character or class of 
investments to be made and does not vest in the 
association, savings institution, its directors, or its 
officers investment discretion in the matter, funds 
held pursuant to such instrument shall be in- 
vested in accordance with Article 1 of Chapter 
36A of the North Carolina General Statutes. 

(b) A» aooociation A savings institution ap- 
pointed as a fiduciary by a court may invest funds 
of the account in any investment permitted to be 
made by fiduciaries by Article 1 of Chapter 36A 
of the North Carolina General Statutes, unless 
the appointing court limits the investment au- 
thority of the fiduciary. If the investment au- 
thority of the fiduciary- is limited by the court, the 
aooociation savings institution must make all in- 
vestments of funds in such accounts by the terms 
of the order of that court. Such orders in either 
case shall be preserved with the fiduciary records 
of the aooociation. savings institution. 

Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-146. 

.0009 SELF-DEALING 

fa+ I'nless lawfully authorised by the inotru 
ment creating the relationship, et by court order, 
funds held- by a» aooociation as fiduciary ohall Bet- 
be invested i» stock ef obligations eft 8f property 
acquired from, the aooociation e? its affiliates, eF 
the directors, officers, ef employees ef- either ef 
them, et individuals wftft whom there exists ouch 
a connection, ef organizations m which there 

■ n'ii-ti- c i i ,^ V~i i~i n ««--»♦ aim£ *• -^ g «3 « uli ♦ ■ ■ 1 1 > . ; t I fa . > , » y -\ r, • 1 f ,* 
PTTTT' L' MT_ I I LI 1 1 11 1 1 t. 1 ■_ J I , CTTT mTT^TTT IU I \*^~ I tTrC L.VV1 VI *J\J 

ef the best judgment ef the association » ae- 
quiring the property- 
fa) (b) Unless lawfully authorized by the in- 
strument creating the relationship,, or by court 
order, property held by a» association a savings 
institution as fiduciary shall not be sold or trans- 
ferred, by loan or otherwise, to the aooociation 
sa\ings institution or its affiliates, or the direc- 
tors, officers, or employees of either of them, or 
to individuals with whom there exists such a 
connection, or organizations in which there exists 
such an interest, as might affect the exercise of 
the best judgment of the aooociation savings in- 



stitution in selling or transferring such property, 
except: 

(1) In cases in which the association savings 
institution has been advised by its counsel 
in writing that it has incurred as fiduciary 
a contingent or potential liability and de- 
sire to relieve itself from such liability, 
such a sale or transfer may be made with 
the approval of the Board of Directors 
and the Administrator, provided that, in 
all such cases, the association, savings in- 
stitution, upon the consummation of the 
sale or transfer, shall make reimbursement 
in cash at no loss to the account; 

(2) As provided in the laws and regulations 
governing collective investment; 

(3) When required by the Administrator. 

(b) £e) If the purchase or retention of stock or 
obligations of the association savings institution 
is authorized by the instrument creating the re- 
lationship, or by court order, it may exercise 
rights to purchase its own stock, or securities 
convertible into its own stock, when offered pro 
rata to stockholders. When the exercise of rights 
or receipt of a stock dividend results in fractional 
share holdings, additional fractional shares may 
be purchased to complement the fractional shares 
so acquired. In elections of directors, a» associ 
ation's a savings institution's share held by the 
aooociation savings mstitution as sole trustee, 
whether in its own name as trustee or in the 
name of its nominee, may not be voted by the 
registered owner unless, under the terms of the 
trust, the manner in which such shares shall be 
voted may be determined by a donor or benefi- 
ciary of the trust and the donor or beneficiary 
actually directs how the shares will be voted. 

(4f Aft aooociation may set! aoooto held- by- it as 
fiduciary m e«e account te itself as fiduciary » 
another account if the transaction is net prohib 
riee by the terms ef a»y governing instrument. 
Aft association may- make a loan te a» account 
from the funds belonging te another such ae- 
count, when the m airing ef such loans te a des- 
ignated account is authoriz e d by- the instrument 
creating the account from which such loans ase 
mado, ae4 is Hot prohibited by- North Carolina 
k+w-r aftd- the terms ef the transaction a*e Saw te 
aft accounts. Aft association may- make a loan 
te as- account a«4 may take as security therefor 
ass e ts ef the account, provided such transaction 
is feif te ouch account aft4 is Bet prohibited by 
North Carolina lawr 

Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-146. 

.0010 CUSTODY OF INVESTMENTS 



1008 



6:15 NORTH CAROLINA REGISTER November I, 1991 



PROPOSED RULES 



(a) The investments of each account shall be 
kept separate from the assets of the association, 
savings institution, and shall be placed in the 
joint custody or control of not fewer than two 
of the officers or employees of the association 
savings institution designated for that purpose 
either by the Board of Directors of the associ 
ation savings institution or by one or more offi- 
cers designated by the Board of Directors of the 
association, savings institution, and all such offi- 
cers and employees shall be adequately bonded. 
To the extent permitted by G.S. 53-159.1, a» as- 
sooiation a savings institution may permit the 
investments of a fiduciary account to be depos- 
ited elsewhere. 

(b) The investment of each account shall be 
either: 

(1) kept separate from those of all other ac- 
counts, except as provided in Rule .0012 
of this Section; or 

(2) adequately identified as the property of the 
relevant account. 

Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-146. 

.001 1 COMPENSATION OF SAVINGS 
INSTITUTION 

(a) If the amount of the compensation for act- 
ing in a fiduciary capacity is not provided for in 
the instrument creating the fiduciary relationship, 
set forth in Chapter 36A of the General Statutes, 
or otherwise agreed to by the parties, a» associ 
ation a savings institution acting in such capacity 
may charge or deduct a reasonable compensation 
for its services. When the association savings 
institution is acting in a fiduciary capacity under 
appointment by a court, it shall receive such 
compensation as may be allowed or approved by 
the court. 

(b) No association savings institution shall, 
except with the specific approval of its Board of 
Directors, permit any of its officers or employees, 
while serving as such, to retain any compensation 
for acting as co-fiduciary with the association 
savings institution in the administration of any 
account undertaken by it. 

(c) No association savings institution shall 
permit an officer or employee engaged in the 
operation of its trust department to accept a be- 
quest or gift of trust assets unless the bequest or 
gift is directed or made by a relative or is ap- 
proved by the Board of Directors of the associ 
ation. savings institution. 

Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-/46. 

.0012 COLLECTIVE INVESTMENT 



(a) Funds held as fiduciary may be held in: 

(1) A common trust fund maintained by the 
association savings institution exclusively 
for the collective investment and reinvest- 
ment of moneys contributed thereto by 
the association savings institution in its 
capacity as trustee, executor, administra- 
tor, guardian, or custodian under the 
North Carolina Uniform Gifts Transfers 
to Minors Act; or 

(2) A fund consisting solely of assets of re- 
tirement, pension, profit sharing, stock 
bonus or other trusts which are exempt 
from Federal income taxation under the 
Internal Revenue Code. 

(b) Collective investments of funds or other 
property by a» association a savings institution 
under Paragraph (a) of this Rule shall be admin- 
istered in accordance with Comptroller of the 
Currency Regulation 9.18, 12 C.F.R. 9.18; pro- 
vided that any documents required to be filed 
with the Comptroller of the Currency under that 
regulation shall also be filed with the Adminis- 
trator who may review such documents for 
compliance with all applicable laws and regu- 
lations. 

Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-146. 

.0013 SURRENDER OF TRUST POWERS 

(a) Any association savings institution which 
has been granted the right to exercise trust pow- 
ers and which desires to surrender such rights 
shall file with the Administrator a certified copy 
of the resolution of its Board of Directors signi- 
fying such desire. 

(b) Upon receipt of such resolution, the Ad- 
ministrator shall make an investigation and if he 
is satisfied that the association savings institution 
has been discharged from all fiduciary duties 
which it has undertaken, it shall issue a certificate 
to such association savings institution certifying 
that it is no longer authorized to exercise 
fiduciary powers. 

(c) Upon issuance of such a certificate by the 
Administrator, aft association a savings institu- 
tion shall no longer be subject to the provisions 
of these Regulations, and shall not exercise 
thereafter any of the powers granted by this Sec- 
tion without first applying for and obtaining new 
authorization to exercise such powers. 



Statutory Authority G.S. 
54C-53; 54C-/46. 



54B-55; 54B-77; 



.0014 EFF. OF APPT.: CONSERVATOR/ 

RECEIVER: VOLUNTARY DISSOLUTION 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1009 



PROPOSED RULES 



(a) Whenever a conservator or receiver is ap- 
pointed for a» asoooiation, a savings institution, 
such receiver or conservator shall, pursuant to 
the instructions of the Administrator and the or- 
ders of the any court having jurisdiction, proceed 
to close such of the association's savings insti- 
tution's trust accounts as can be closed promptly 
and transfer all other such accounts to substitute 
fiduciaries. 

(b) Whenever a» association a savings institu- 
tion exercising trust powers is placed in voluntary 
dissolution, the liquidating agent shall, in ac- 
cordance with North Carolina law, proceed at 
once to liquidate the affairs of the trust depart- 
ment as follows: 

(1) All trusts and estates over which a court 
is exercising jurisdiction shall be closed or 
disposed of as soon as practicable in ac- 
cordance with the order or instruction of 
such court; and 

(2) All other accounts which can be closed 
promptly shall be closed as soon as prac- 
ticable and final accounting made there- 
for, and all remaining accounts shall be 
transferred by appropriate legal pro- 
ceedings to substitute fiduciaries. 



Statutory Authority G.S. 54B-55; 
54C-53: 54C-146. 



54B-77; 



.0015 REVOCATION OF TRUST POWERS 

(a) In addition to the other sanctions available, 
if, in the opinion of the Administrator, a» asso 
elation a savings institution is unlawfully or 
unsoundly exercising, or has unlawfully or 
unsoundly exercised, or has failed for a period of 
five consecutive years to exercise, the powers 
granted by this Section or otherwise fails or has 
failed to comply with the requirements of this 
Section, the Administrator may issue and serve 
upon the association savings institution a notice 
of intent to hold a hearing before the Commis- 
sion concerning his recommendation to revoke 
the authority of the association savings institu- 
tion to exercise the powers granted by this Sec- 
tion. The notice shall contain a statement of the 
facts constituting the alleged unlawful or un- 
sound exercise of powers, or failure to exercise 
powers, or failure to comply, and shall fix a time 
and place at which such a hearing will be held to 
determine whether an order revoking authority 
to exercise such powers should issue against the 
association, savings institution. 

(b) Unless the association savings institution 
so served shall appear at the hearing by a duly 
authorized representative, it shall be deemed to 
have consented to the issuance of the revocation 
order. In the event of such consent or if, upon 
the record made at any such hearing, the Com- 



mission shall find that any allegation specified in 
the notice of charges has been established, the 
Board Commission may issue and serve upon the 
association savings institution an order prohibit- 
ing it from accepting any new or additional trust 
accounts and revoking authority to exercise any 
and all powers granted by this Section except that 
such order shall permit the association savings 
institution to continue to serve all previously ac- 
cepted trust accounts pending their expeditious 
divestiture or termination. 

(c) A revocation order shall become effective 
not earlier than the expiration of 30 days after 
service of such order upon the association savings 
institution so served (except in the case of a re- 
vocation order issued upon consent, which shall 
become effective at the time specified therein), 
and shall remain effective and enforceable, except 
to such extent as it is stayed, modified, termi- 
nated, or set aside by action of the Board Com- 
mission or a reviewing court. 

Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-I46. 

.0016 APPLICABILITY OF GENERAL LAWS 
REGARDING TRUST OPERATIONS 

Savings institutions Associations exercising trust 
powers under the provisions of this Section shall 
comply with the provisions of Chapter 36A of 
the General Statutes. 

Statutory Authority G.S. 54B-55; 54B-77; 
54C-53; 54C-146. 

.0017 REPORTS AND FEES 

Savings institutions Associations engaging in 
trust operations shall make such reports regard- 
ing those operations as the Administrator shall, 
may, from time to time, require. In addition to 
any other fees, associations savings institutions 
acting as fiduciaries shall pay an examination fee 
for examination of its fiduciary activities, in an 
amount to be determined by the Administrator 
in accordance with G.S. 54B-57 or 54C-55. 



Statutory Authority G.S. 54B-55; 
54B-77; 54C-53; 54C-55; 54C-146. 



54B-57; 



SUBCHAPTER 16L - VOLUNTARY 
DISSOLUTION 

.0002 DISPOSITION OF ASSETS 

.After approval of the plan of liquidation by the 
Administrator, the association savings institution 
shall, except in case of dissolution under G.S. 
SS 1 16(a)(2). f^) a«4 f-44^ G.S. 54B-40 or 54C-40. 
immediately cause notice of the dissolution to be 
mailed to each known creditor of the association, 
savings institution, and to the Secretary' of Re- 



1010 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



venue, and such notice shall be published once a 
week for four successive weeks in a newspaper 
published in the county wherein the association 
savings institution has its principal office, and, if 
there be no newspaper published in such county, 
then in some newspaper of general circulation in 
such county. The association savings institution 
shall then proceed to collect its assets, convey 
and dispose of such of its properties as are not to 
be distributed in kind to its members or share- 
holders, pay, satisfy and discharge its liabilities 
and obligations and do all other acts required to 
liquidate its business and affairs, including the 
collection of unpaid subscriptions necessary to 
equalize the agreed payments by subscribers of 
its shares. After paying or adequately providing 
for the payment of all its obligations, the associ 
ation savings institution shall distribute the re- 
mainder of its assets, either in cash or in kind, 
among its members or shareholders according to 
their respective rights and interests. 



Statutory A uthority 
54C-42; 54C-53. 



G.S. 54B-42; 54B-55; 



.0003 REVOCATION AND CANCELATION OF 
DISSOLUTION 

(a) At any time after the filing of the plan of 
liquidation and prior to the filing of a certificate 
of dissolution, a voluntary dissolution may be 
revoked by filing of a statement of revocation of 
dissolution. The contents of such a statement 
and the proceedings taken so as to revoke a dis- 
solution shall conform with such adaptations as 
are appropriate to revocation under either G.S. 
54B-40 or 54B-41 or 54C-40 or 54C-41. 

(b) Upon the filing of such statement of revo- 
cation of dissolution, the revocation of the vol- 
untary dissolution proceedings shall become 
effective and the association savings institution 
may again carry on business. 



Statutory Authority G.S. 54B-41 
54C-42; 54C-53. 



54B-55; 



.0004 WAIVER 

The Administrator may waive or alter any re- 
quirements set forth in this Section to promote 
the best interests of the public or the association. 
savings institution. 



Statutory A uthority 
54C-42; 54C-53. 



G.S. 54B-42; 54B-55; 



****************** 



Ivotice is hereby given in accordance with G.S. 
150B-21.2 that the Savings Institutions Division 



intends to adopt rules cited as 4 NCAC I6G .0/03 

- .0/06, .0311 - .03/6, .0404 - .0405, .0509 - .05/6, 
.0606 - .0608, .07/2 - .0722, .0822 - .0833, .0908 

- .0912, .1203 - .1204; amend 4 NCAC 16D .0101, 
.0301, .0402 - .0403, .0407, .0902 and repeal 4 
NCAC 16C .0303; 16D .0404, .0506. 

1 he proposed effective date of this action is 
February 15, 1992. 

1 he public hearing will be conducted at 10:00 
a.m. on November 19, 1991 at the Hearing Room, 
Third Floor, 1 1 10 Navaho Drive, Raleigh, NC. 

l\eason for Proposed Action: 4 NCAC 16G 
.0103 - .0106, .0311 - .0316, .0404 - .0405, .0509 

- .0516, .0606 - .0608, .0712 - .0722, .0822 - .0833, 
.0908 - .0912, .1203 - .1204 - These rules are re- 
quired by the adoption by the General Assembly 
of Chapter 54C of the General Statutes. 4 NCA C 
16D .0101, .0301, .0402 - .0403, .0407, .0902 - 
Amendments to clarify the intent of these rules 
based on changes in the federal requirements. 4 
NCAC 16C .0303 and 4 NCAC I6D .0404, .0506 

- Repeal, these rules are duplicative of statutory 
requirements. 



Co 



■ ornment Procedures: All requests to present 
testimony must be received at the Division's ad- 
dress at least 48 hours before the hearing. Writ- 
ten comments will be received for 30 days after 
publication of the notice of hearing. 

CHAPTER 16 -SAVINGS INSTITUTIONS 

DIVISION: SAVINGS INSTITUTIONS 

COMMISSION 

SUBCHAPTER 16C - APPLICATIONS 

SECTION .0300 - APPLICATION TO CHANGE 

LOCATION OF BRANCH OFFICE OR 

PRINCIPAL OFFICE 

.0303 LOCATION CHANGE 

•No association shall change the location e£ its 
principal office m- a branch office without feet- 
obtaining the written approval e( the adminis 
trator. 

Statutory Authority G.S. 54B-23; 54B-55. 

SUBCHAPTER 16D - OPERATION OF SAVINGS 
ASSOCIATIONS 

SECTION .0100 - DIRECTORS: OFFICERS AND 
EMPLOYEES 

.0101 COMPOSITION OF BOARD OF 
DIRECTORS 



6.15 NORTH CAROLINA REGISTER November 1, 1991 



101 1 



PROPOSED RULES 



(a) The number of directors constituting the 
initial board of directors shall be not less than 
seven. Thereafter, the provisions of Chapter 55 
of the General Statutes shall govern the numer- 
ical composition of boards of directors for both 
stock and mutual associations. Other guidelines 
for the composition of a board of directors are 
as follows: 

( 1 ) No more than one-third of the board of 
directors shall be salaried officers or em- 
ployees of the association, or of any sub- 
sidiary 7 or (except in the case of an 
association having 80 percent or more of 
any class of voting shares owned by a 
holding company or controlling person) 
any holding company or controlling per- 
son affiliate thereof. 

(2) No more than two directors shall be 
members of the same immediate family. 

(3) No two directors who are attorneys may 
be members of the same law firm. 

(4) No more than one-third of the board of 
directors shall be directors, officers or 
employees of a competing financial insti- 
tution. 

(5) The chief managing officer of the associ- 
ation shall be a member of the board of 
directors. 

(b) A director shall not vote on any matter in 
which he has a personal or financial interest. 

(c) When an association takes action resulting 
in the establishment of a new chief executive of- 
ficer or director, the association shall notify the 
Administrator in writing in advance of such 
change, and shall provide the name of the new 
chief executive officer or director, the effective 
date of the appointment, and a statement of the 
person's past and current business and profes- 
sional affiliations. The name of any departing 
chief executive officer or director shall also be 
provided. 

Statutory Authority G.S. 54B-55. 

SECTION .0300 - RECORDS 

.0301 GENERAL POLICIES 

(a) Records to be Kept at Principal Office. 
Every association shall keep at the principal of- 
fice correct and complete books of account and 
minutes of the proceedings of members, share- 
holders, directors and committees. Complete 
records of all business transacted at the principal 
office shall be maintained at the principal office. 
Everything relating to the business of an associ- 
ation shall be examined and investigated by the 
Administrator on a regular and periodic basis. 
Every association and service corporation thereof 
shall be audited at least once in each calendar 



year by independent auditors. The audit shall 
be done on the basis of generally accepted ac- 
counting principles, unless otherwise provided by 
this Chapter. The association shall file with the 
Administrator one copy of the audit report along 
with one copy of the auditor's management letter 
and any other letters regarding the audit within 
90 days after the end of its fiscal year, unless ex- 
tended in writing by the Administrator. The as- 
sociation shall also submit to the Administrator 
a copy of the association's written response to 
the auditor's management letter at the time such 
response is provided to the appropriate federal 
regulatory authority. 

(b) Records to be Prepared at Branch Office. 
Each branch office shall prepare detailed records 
of all business transacted at such branch office, 
and shall furnish full control records to the prin- 
cipal office. 

(c) Accounting Practices, te be Approved by 
the administrator. Every association shall ob- 
serve such generally accepted accounting princi- 
ples and practices a* the administrator may- 
require, unless otherwise required by regulations 
of the appropriate federal regulatory authority. 

(d) Books to be Closed on December 31. Ev- 
ery association shall close its books at the close 
of business on December 31 of each year, or 
other dates if authorized by the administrator. 

(e) Bonds and Other Obligations to be Carried 
at Actual Costs. The bonds or other investments 
of an association shall not be carried on its books 
at more than the actual costs thereof. 

(f) Real Estate to be Carried at Amount In- 
vested in Same. An association shall not carry 
any real estate on its books at a sum in excess of 
the total amount invested by such association on 
account of such real estate, including advances, 
costs, and improvements, but excluding accrued, 
uncollected interest. 

(g) Appraisal of Real Estate Owned. Every 
association shall appraise each parcel of real es- 
tate at the time of acquisition thereof. The re- 
port of each such appraisal shall be submitted in 
writing to the board of directors and shall be kept 
in the records of the association. 

(h) Maintenance of Membership Records. 
Every mutual association shall maintain mem- 
bership records, which shall show the name and 
address of the member, the status of the member, 
status of the member as a withdrawable account 
holder, or an obligor, or a withdrawable account 
holder and obligor, and the date of the member- 
ship thereof. 

(i) Maintenance of Stockholder Records. Ev- 
ery stock association shall keep at its principal 
office or at the office of its transfer agent or reg- 
ister, a record of its stockholders which contains 
the names and addresses of all stockholders, and 



1012 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



the number, class and series of shares held by 
each. Whenever called upon by the administra- 
tor, a stock association shall file in the office of 
the administrator a correct list of all its stock- 
holders, the resident address of each, the number 
of shares of stock held by each, and the dates of 
issue. When 30 H) percent or more of the out- 
standing capital stock of the association shall be 
owned controlled by one owner, an association 
shall advise the administrator in writing, and shall 
include the resident address and number of shares 
held by the shareholder. 

Statutory Authority G.S. 54B-21; 54B-55. 

SECTION .0400 - LOANS 

.0402 APPRAISALS 

Except as exempted under the regulations of the 
appropriate federal regulatory agency, an associ- 
ation shall not grant, make, disburse any portion 
of, or invest its funds in any loan on the security 
of real estate, until at least one qualified person, 
whose compensation shall not be affected in any 
way by the approval or denial of the loan, has 
appraised the real estate security and the signed 
appraisal »f appraisals have boon approved t» 
accordance with the by la wo &( the association. 
Separate appraisals as te km4 aftd improvements 
shall he mad e aft4 a soparato appraisal shall he 
mad e e« each property when a mortgago loan is 
secured by more than »«e property, in accord- 
ance with the regulations of the appropriate fed- 
eral regulatory agency. 

Statutory Authority G.S. 54B-55; 54B-161. 

.0403 RECORDS WITH RESPECT TO LOANS 

(a) Mortgage Loans. Each association shall 
maintain records with respect to each loan on the 
security of real estate which shall include: 

(1) An application signed by the borrower 
or his agent, containing adequate infor- 
mation which shall include the purpose 
of the loan, the identity of the property 
or properties securing the loan, and the 
purchase price of the property paid by or 
agreed to be paid by the applicant where 
the purpose of the loan is for the purchase 
of the real estate securing such loan; 

(2) The credit ability of the applicant shall 
be ascertained in the application or by a 
credit report, a financial report or by oth- 
ers at the request of the association; 

(3) A written appraisal report conforming to 
the written appraisal policy of the associ- 
ation, signed and dated prior to the ap- 
proval of the application; 

(4) Evidence to show: 



(A) proper approval of the loan and the 
terms and conditions of such approval; 

(B) a loan settlement statement, signed by 
the borrower, showing the distribution of 
the loan proceeds; 

(C) the association's approved attorney's 
title opinion or a valid title insurance pol- 
icy from a title insurance company au- 
thorized to do business in North Carolina; 

(D) hazard insurance coverage; 

(E) release or releases of any portion of the 
collateral, with a revised appraisal of the 
remaining security retained; and 

(F) the loan agreement, inspection reports, 
owner's and contractor's affidavits and 
other necessary procedures on con- 
struction loans, where applicable; 

(5) All loan modifications, properly executed 
and documented and recorded in the 
minutes; 

(6) Record of insurance expirations unless a 
master mortgagee insurance policy is held 
in full force and effect; 

(7) Tax records; 

(8) A mortgage loan register to show; 

(A) account number; 

(B) borrower's name; 

(C) date of deed of trust; 

(D) appraisal; 

(E) interest rate; 

(F) monthly payment and date of first 
payment; 

(G) purpose of the loan and purchase price 
if for purchase of property securing the 
loan and the contract price if for purposes 
of construction; and 

(H) hypothecation, if any, designating 
hypothecator, amount, and type of pledge 
collateral; all to be incorporated in the 
hypothecation agreement; 

(9) Records on acquisition of mortgaged se- 
curity to include: 

(A) a detailed record of the acquisition, 
whether through foreclosure or otherwise, 
and a description of the property or 
properties including the name of the for- 
mer owner; 

(B) maintenance of subsidiary ledger ac- 
counts for each separate acquisition, to 
record all items subject to capitalization 
or to income and expense during the pe- 
riod such property is owned by the asso- 
ciation; 

(C) designation of all fees, charges and 
commissions and to whom such were 
paid; 

(D) a copy of the trustee's report relating 
to foreclosure, when applicable; 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1013 



PROPOSED RULES 



(10) A review of 60 days or over delinquent 
mortgage loans by the association's board 
of directors or executive committee at 
least once a month and such review to be 
recorded in the minutes of the board of 
directors or executive committee meeting; 

(11) A "loans in process account" to support 
the undisbursed portion of the proceeds 
of each mortgage loan or unsecured con- 
struction loans; and 

(12) A certification signed bv the borrower 
indicating that the borrower has received 
the disclosure material required bv the 
Federal Truth- In- 1 ending Act, 12 LSC 
1601 et.seq. 

(b) Withdrawable Account Loans. Each as- 
sociation shall maintain records with respect to 
each loan secured by withdrawable accounts 
which shall include a withdrawable account loan 
register. Such loan register or registers shall in- 
clude: 

(1) account number, 

(2) borrower's name, 

(3) date of loan, 

(4) interest rate, 

(5) payment schedule. a»4 
(4) 4a*e of fe* payment . 

fe4 Other Loan Register. Fach association 
shall maintain adequate* aft4 appropriate - records 
with respect to all other types of loans made by- 
the association which shall include a loan regis 
k*Fr Separate registers shall be maintain e d with 
respect to- consumer loans a«4 with r e sp e ct te- 
commercial loans. Such loan r e gister e* registers 
shall include: 

(44 account number, 

borrower's name, 

tkrie ef loan, 

interest rat e , 

payment schedule, 

4*te of fe* paym e nt, 



(3) 

f44 

(ffy purpose ef loan, »ft4 
(-84 type ȣ collateral, if secured. 
(e) Consumer loans. Defined as loans for 



(2) The credit ability of the applicant shall 
be ascertained in the application and sup- 
ported by a written credit report and a 
complete financial statement, verified and 
analyzed by a qualified loan officer. 

(3) A written appraisal or value estimate of 
the collateral conforming to the written 
policies of the institution and dated prior 
to the approval of the application if the 
loan is to be secured. 



(4) An 



An approved attorney's title opinion or 
valid title insurance policy issued bv an 
insurance company authorized to do 
business in North Carolina if the loan is 
underwritten based on the value of real 
estate collateral. 
(5) Evidence to show: 



(A) proper approval of the loan and the 
terms and conditions of such approval; 

(B) the distribution of the loan proceeds; 

(C) proper insurance coverage on the 
collateral; 

(D) perfection of hens or security interest 
by proper endorsement of automobile ti- 
tles and or LCC tilings. 

(6) All loan modifications, extensions and 
renewals properly executed and docu- 



mented and, if required by the associ- 
ation s consumer lending policy, recorded 
in the minutes. 



(7) A consumer loan register to show: 
account number; 



A 

021 

Oil 



borrower's name; 



date of loan; 
interest rate; 

schedule and date of first 



payment 
payment; 

(F) purpose of loan; 

(G) type and value of collateral, if secured, 
(d) Commercial Loans. Defined as any loan 

for commercial, corporate, business or agricul- 
tural purposes which would not otherwise qualify 
as a mortgage loan. L'ach mstitution shall 
for maintain records with respect to each commercial 



personal, tamilv or household purposes and loans loan which shall include; 



incident thereto, which may be made as either 



open end or closed end consumer credit , but not 
including credit extended in connection with 
credit cards or bona tide overdraft loans. Fach 
institution shall maintain records with respect to 
each consumer loan which shall include: 

( 1 ) An application signed by the borrower 
or his agent, containing adequate infor- 
mation which shall include the purpose 
of the loan, the identity of the collateral 
securing the loan and the purchase price 
of the collateral where the purpose of the 
loan is to purchase said collateral. 



ill 



An application signed by the borrower 
or his agent containing adequate informa- 
tion to mclude the purpose of the loan, 
and the collateral securing the loan (if ap- 
plicable). 

(2) The credit ability of the applicant shall 
be ascertained in the application and sup- 
ported by a wntten credit report and a 
complete set of current financial state- 
ments, verified and analyzed by a qualified 
loan officer. 

(3) A wntten appraisal report, if secured bv 
real estate, or other wntten estimate of 



1014 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



value conforming to the institution's poli- 
cies if secured by other than real estate. 
(4) Evidence to show: 

(A) proper approval of the loan and the 
terms and conditions of such approval; 

(B) a loan settlement statement, signed by 
the borrower, showing the distribution of 



I 1 \ QJ3 fivnl/inotiAn ,-» i t V~i Q ■ 

r T J LUI JJJILJ1UJIULHJ7 IT ^TT IIITJ I 

instrumont; a»a 
f3) a» oxamplo &f the op e ration &f the altor 
native mortgag e instrumont. 
(4} The borrower shall aet be charg e d any 
costs ef fees » connoction with regularly sohod 
u4ea adjustm e nts t& the intorost Fatey the pay- 
mont, the outstanding principal loan balanco, e* 

CUv H7LUI rCTTTTT 



the loan proceeds; 
(C) adequate perfection of all Liens and se- 
curity interests including attorney's title 
opinion or valid title insurance policy Statutory Authority G.S. 54B-55; 54B-I63. 



from a title insurance company authorized 
to do business in North Carolina if se^ 
cured bv commercial real estate; 



(D) appropriate insurance on all collateral; 

(E) release or partial releases of collateral, 
with a revised appraisal of the remaining 
collateral; 

(F) all loan modifications, extensions and 
renewals, properly executed and docu- 
mented and recorded in the minutes. 



(5) A commercial loan register to show: 
(A) account number; 



m 

m 

m 

in 



borrower's name; 
date of note; 



appraisal or other estimate of value; 
interest rate; 

schedule and date of first 



payment 
payment; 
(G) loan purpose and type of collateral, if 
secured. 

Statutory Authority G.S. 54B-55; 54B-155. 

.0404 ALTERNATIVE MORTGAGE 
INSTRUMENTS 

fa) A» association Hsay ase asy altornativo 
mortgage} instrumont agreed upon by the associ 
ation a»4 the borrowor. The torm "altornativo 
mortgage instrumont" shall inoludo a«y type »f 
mortgago instrumont oth e r than a conventional 
mortgago instrument with a fixod interest rate 
a»e fixod payments. A» association is doomed 
te havo complied with this Rulo if it comphos 
with similar r e quirements onforood by the federal 
regulatory authority. Paragraphs (fe) a»4 (e) ef 
this R.ul e apply only to credit transactions where 

t nO \~\i \V X' i W' i -T I B ; i " Q * ] ' Cfl I paCC Q " Q " O t n.» nit^nM.1,1 
niv L'UilU IH.1 ITT CT 1 III [Ul HI UL1 JU11 LL1 1U L I IL. II 1 I V. I ItH_TJ 

ase &£ the fee» proceeds is fe* personal, family, 
&f household purposes. 

(h) Aft association using aft altornativo mort 
gage instrumont shaft maintain » the mortgago 
feaft file a certification sign e d by the borrower 
indicating that the borrowor has received the eis- 
closuro material specified m Paragraph (e) ȣ this 
ftftle before closing the loan. 

(e) Prior t& closing, the borrower shall be fof- 
rushed disclosure material which shall include: 



.0407 LOANS TO ONE BORROWER 

Upon a written determination by the Adminis- 
trator that an association is operating with unsafe 
and unsound lending practices, the Administrator 
may establish such more restrictive limits on 
loans to any one borrower than the limits estab- 
lished by the appropriate federal regulatory au- 
thority, that he These restrictive amounts shall 
be at such limits as the administrator deems ap- 
propriate to protect the public. At fte time shall 
the aggrogato amount ef- loans »f a»y typo e«t- 
standing, granted by a» association te- asy e»e 
borrower, oxcoed the lessor ef the amount ostab 
lishod by G.S. 5 ' 1B 1 6 - 1 &f by the fed e ral rogula 
tftfy authority. 

Statutory Authority G.S. 54B-55; 54B-164. 

SECTION .0500 - WITHDRAWABLE 
ACCOUNTS 

.0506 CREDIT CARDS 

Aft association may issue credit cards, e xtend 
credit ift connection therewith, aftd- othorwiso 
e ngage i» ©f participate i» credit eafd- operations. 

Statutory Authority G.S. 54B-55; 54B-77. 

SECTION .0900 - INVESTMENTS 

.0902 STOCK IN OTHER DEPOSITORY 
ASSOCIATIONS 

(a) No association shall invest in the stock of 
another association depository institution with- 
out giving prior written notice to the Adminis- 
trator. 

(b) No association shall invest in the aggregate 
more than five percent of its net worth in the 
stock of other associations depository institutions 
without the prior written approval of the Ad- 
ministrator. 

Statutory Authority G.S. 54B-55; 54B-I93. 

SUBCHAPTER 16G - MUTUAL TO STOCK 
CONVERSIONS 

SECTION .0100 -SCOPE 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1015 



PROPOSED RULES 



.0103 DEFINITIONS 

As used in this Subchapter and in the forms 
prescribed under this Subchapter, the words and 
phrases defined by G.S. 54C-4 and the following 
definitions apply, unless the context otherwise 
requi 



( 1 ) "Affiliate," "an affiliate of," or ^a person 
affiliated with" used in connection with an- 
other specified person shall mean a person 
that directly, or indirectly through one or 
more intermediaries, controls or is under 
common control with, the person specified. 

(2) "Amount," when used in regard to securi- 
ties, shall mean the principal amount if re- 
lating to evidences of indebtedness, the 
number of shares if relating to shares of 
stock, and the number of units if relating to 
any other kind of security. 

(3) "Applicant" shall mean a savings bank 
which has applied to convert to stock own- 
ership pursuant to this Subchapter. 

(4) 'Broker" shall mean any person engaged 
in the business of effecting transactions in 
securities for the account of others. 



(5) "Capital stock" shall mean common stock. 



permanent stock, guaranty stock, permanent 
reserve stock, or any similar certificate evi- 
dencing nonwithdrawable capital. 

(ft) 'Dealer" shall mean any person who en- 
gages either for all or part of his time, di- 
rectly or indirectly, as agent, broker, or 
principal, in the business of offering, buying, 
selling, or otherwise dealing or trading in 
securities issued by another person. 

(7) "Deposit account" shall mean that part of 
the liability of the savings bank which is 
credited to the account of the holder thereof. 



including certificates of deposit. 

(8) "Eligibility record date" shall mean the re- 
cord date for determining eligible account 
holders of a converting savings bank. 

(9) "Eligible account holder" shall mean any 
person holding a qualifying deposit as de- 
termined in accordance with Rule .0313 of 
this Subchapter. 

(10) "Employee" shall not mean a director or 
executive officer of a savings bank. 

(11) "Equity security" shall mean any stock or 
similar security, or any security convertible, 
with or without considerations, into such 
security, or earning anv warrant or right to 
subscribe to or purchase such security, or 
any such warrant or right. 

(12) "Executive Otficer" shall mean anv person 
performing, a policy making function with 
respect to any organization whether incor- 
porated or unincorporated. 



(13) "Investment representative" shall mean a 
professional investment advisor acting as 
agent for the purchaser and independent of 
the seller and not acting on behalf of the 
seller in connection with the transaction. 

(14) "Market maker" shall mean a dealer who, 



with respect to a particular security: 

(a) regularly publishes a bona fide, compet- 
itive bid and offer quotations in a recog- 
nized inter-dealer quotation system; or 

(b) furnishes bona fide competitive bid and 
offer quotations on request; and 

(c) is ready, willing and able to effect trans- 
actions in reasonable quantities at his 
quoted prices with other brokers or deal- 
ers. 

(15) "Material," when used to qualify a re- 



quirement for the furnishing of information 
as to anv subject, limits the information re- 
quired to those matters as to which an av- 
erage prudent investor ought reasonably to 
be informed before purchasing an equity se- 
curity of the applicant, or matters as to 
which an average prudent savings bank 
member ought reasonably to be informed in 
voting upon the plan of conversion of the 
applicant. 
ft| "Negotiated transactions" shall mean 
transactions in which the securities are of- 
fered and the terms and arrangements relat- 



ing to anv sale of the securities are arrived 
at through direct communications between 
the seller or anv person acting in its behalf, 
and the purchaser or hjs investment repre- 
sentative. 

( 1 7) "Offer," "offer to sell." or "offer of sale" 
shall mean even' attempt or offer to dispose 
of. or solicitation of an offer to buy, a secu- 
rity or interest in a security, for value. These 
terms shall not include preliminary negoti- 
ations or agreements between an applicant 
and any underwriter or among undenvriters 
who are or will be in pnvitv of contract with 
an applicant . 

( 18) "Person" includes an individual and entity 
as defined in G.S. 55-1-40. 



( 19) "Proxy" shall mean even' form of au- 
thorization by which a person is^ or may be 
deemed to be^ designated to act for a savings 
bank member in the exercise of his voting 
rights in the affairs of a savings bank. 

Such an authorization may take the form 
of failure to dissent or ob|ect. 

(20) "Purchase" and "buy" shall mean every 
contract to purchase, buy, or othenvise ac- 
quire a security or interest in a security for 
value. 



1016 



6:15 NORTH CAROLINA REGISTER November L 1991 



PROPOSED RULES 



(21) "Sale" and "sell" shall mean every contract 
to sell or otherwise dispose of a security or 
interest in a secuntv for value. 

(22) "Security" shall mean any note, stock, 
treasury stock, bond, debenture, transferable 
share, investment contract, voting-trust cer- 
tificate, or in general, any instrument com- 
monly known as a "security". It shall also 
include any certificate of interest or partic- 
ipation in, temporary or interim certificate 
for, receipt for, or warrant or right to sub- 
scribe to or purchase, any of the forgoing. 

(23) "Solicitation" and "solicit" shall mean: 

(a) any request for a proxy whether or not 
accompanied by or included in a form of 
proxy; 

(b) any request to execute, not execute, or 
revoke a proxy; or 

(c) the furnishing of a form of proxy or other 
communication to savings bank members 
under circumstances reasonably calculated 
to result in the procurement, withholding, 
or revocation of a proxy. The terms do 
not apply, however, to the furnishing of a 
form of proxy to a savings bank member 
upon the unsolicited request of the mem- 
ber, the performance of acts required bv 
Rule .0514 of this Subchapter, or to the 
performance bv any person of ministerial 
acts on behalf of a person soliciting a 

P rox V- 

(24) "Subscription offering" shall mean the of- 
fering of shares of capital stock, through 
nontransferable subscription rights issued to: 

(a) eligible account holders as required bv 
Rule .031 1(2) of thus Subchapter; 

(b) supplemental eligible account holders as 
required bv Rule .031 1(4) of this Sub- 
chapter; 

(c) members entitled to vote at_ the meeting 
called to consider the conversion as re- 
quired bv Rule .031 1(5) of this Subchap- 
ter; 

directors, officers, and employees, as per- 
mitted bv Rule .0312(2) of this Subchap- 
ter: and 

eligible account holders, supplemental eli- 
gible account holders, and voting mem- 
bers as permitted by Rule .0312(3) of this 
Subchapter. 

"Subsidiary" of a specified person shall 
mean a person controlled, directly or indi- 
rectly, through one or more intermediaries 
bv the specified person. 
26) "Supplemental eligible account holder" 
shall mean any person holding a qualifying 
deposit, except executive officers, directors, 
and their associates, as of the supplemental 



Mi 



[£) 



eligibility record date required bv Rule .031 1 
of this Subchapter. 
27) "Underwriter" shall mean any person who 
has purchased from an applicant with a view 
to, or offers or sells for an applicant in con- 
nection with, the distribution of any secu- 
rity, or participates or has a direct or indirect 
participation in the direct or indirect under- 
writing of any such undertaking. Such term 
shall not include a person whose interest is 
limited to a commission from an underwriter 
or dealer not in excess of the usual and cus- 
tomary distributors' or sellers' commission. 



The term "principal underwriter" shall mean 
an underwriter in privity of contract with the 
applicant or other issuer of securities as to 
which he is the underwriter. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0104 GENERAL REQUIREMENTS 

(a) No application for conversion shall be ap- 
proved bv the administrator unless: 

( 1 ) The conversion will be conducted as pro- 
vided bv law and this Subchapter and 
pursuant to a plan of conversion approved 
bv the administrator. 

(2) The conversion will not result in a taxable 
reorganization under the Internal Revenue 
Code. 



(b) The corporate existence of a mutual savings 
bank converting to stock ownership shall not 
terminate. The converted savings bank shall be 
deemed to be a continuation of the savings bank 
so converted. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0105 APPLICATION FOR CONVERSION 

An applicant that desires to convert in accord- 
ance with this Subchapter shall file a copy of an 
Application for Conversion ( Form AC). Form 
AC incorporates the statutory requirements and 
criteria and provides for the submission of re- 
quired information. This form can be obtained 
Irom the Division at its mailing address. Such 
application shall be accompanied bv a check in 
the amount of the appropriate application fee. 
Such fee is nonrefundable. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0106 CONFIDENTIAL INFORMATION 

Should the applicant desire to submit any in- 
formation it deems to be of a confidential nature 
regarding the answer to any item or a part of any 
exhibit included in the Application for Conver- 
sion, such information pertaining to such item 
or exhibit shall be separately bound and labeled 



6:15 NORTH CAROLINA REGISTER November 1, 1 99 1 



1017 



PROPOSED RULES 



'confidential," and a statement shall be submit- 



ted therewith briefly setting forth the grounds on 
which such information should be treated as 
confidential under G.S. 54C-60. Only general 



reference thereto need be made in that portion 
of the application which the applicant deems not 
to be confidential. Applications under this Sub- 
chapter shall be made available for inspection by 
the public, except lor portions which are bound 
and labeled "confidential" and which the admin- 



istrator determine to be of a confidential nature 
under G.S, 54C-6IJ. The administrator will 
withhold the public availability of preliminary 
copies of proxy soliciting materials without the 
necessity of their being bound and labeled as 
"confidential". The applicant will be advised of 
any decision by the administrator to make public 
information designated as "confidential" by the 
applicant I \ en thoueh sections vA lilil applica- 
tion are considered "confidential" as far as public 
inspection thereof is concerned, the administra- 
tor, to the extent deemed appropriate, may com- 
ment on such confidential submissions in any 
public statement in connection with any decision 
on the application without prior notice to the 
applicant. 

Statutory Authority G.S. 54C-33; 54C-53. 

SECTION .0300 - GENERAL PRINCIPLES FOR 
CONVERSIONS 

.031 1 REQUIRED PROVISIONS IN PLAN OF 
CONVERSION 

The plan of conversion shall: 

( 1 ) Provide that the converting savings bank 
shall issue and sell its capital stock at a total 
price equal to the estimated pro forma mar- 
ket value of such stock in the converted 
savings bank, based on an independent val- 
uation, as provided in Rule .1)706 of this 
Subchapter. 

(2) Provide that each eligible account holder 



shall 



without 



payment. 



nontransferable subscription rights to pur- 
chase capital stock. Subscription rights shall 
be allocated among the eligible account 
holders on an equitable basis in an amount 
not greater than the maximum purchase 
limitation established for the public o tiering 
or the direct community ottering. The plan 
ot conversion shall provide a comprehensive 
description of this allocation including a de- 
tailed description of the allocation in the 
event of an oversubscription of the capital 
stock. In the event of an oversubscription, 
shares shall be allocated on an equitable ba- 
sis that is related to the amount of the sub- 
scriber's qualifying deposits. 



(3) Provide that nontransferable subscription 
rights to purchase capital stock received by 
executive officers and directors of the appli- 
cant and their associates based on their in- 
creased deposits in the applicant savings 
bank in the one-year period preceding the 
eligibility record date shall be subordinated 
to all other subscriptions involving the exer- 
cise of nontransferable subscription rights to 
purchase shares pursuant to Paragraph (2) 
of this Rule. 

(4) Provide that, in plans involving an e lia- 
bility record date that is more than 15 
months prior to the date of the latest 
amendment to the application for conver- 
sion filed prior to the administrator's ap- 
proval, a supplemental eligibility record date 
shall be determined whereby each supple- 
mental eligible account holder of the appli- 
cant shall receive without payment, 
nontransferable subscription rights to pur- 
chase capital stock m an amount related to 
their respective qualifying deposits. 

(a) Subscription rights received pursuant to 
this Subsection shall be subordinated to 
all rights received by eligible account 
holders to purchase shares pursuant to 
Paragraphs (2) and (3) of this Rule. 

(b) Any nontransferable subsenption rights to 
purchase shares received hv an eligible 
account holder in accordance with Para- 
graph (2) of this Rule shall be applied in 
partial satisfaction of the subscription 
rights to be distributed pursuant to this 
Paragraph. 

(c) In the event of an oversubscription for 
supplemental shares pursuant to this Par- 
agraph, shares shall he allocated among 
the subscribing supplemental eligible ac- 
count holders on such equitable basis, re- 
lated to lil£ amounts of their respective 
qualifying deposits, as may be provided in 
the plan of conversion. 

(5) Provide that voting members who arc not 
either eligible account holders or supple- 
mental eligible account holders shall receive, 
without payment, nontransferable sub- 
scription rights to purchase capital stock on 
an equitable basis defined in the plan of 
conversion. Subscription rights received 
pursuant to this Paragraph shall be subordi- 
nated to all nghts received by e liable ac- 
count holders and supplemental eligible 
account holders to purchase shares pursuant 
to Paragraphs (2). (3), and (4) of this Rule. 
In the event of an oversubscription of capital 
stock pursuant to this Paragraph, shares 
shall be allocated among the subscribing 
voting members on such equitable basis as 



1018 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



may be provided in detail in the plan of 
conversion. 
(6) Provide that any shares of the applicant 
not sold to persons with subscription rights 
shall either be sold in a public offering 
through an underwriter or directly by the 
applicant in a direct community offering, 
subject to the applicant demonstrating to the 
administrator the feasibility of the method 
of sale and to such conditions as may be 
provided in the plan of conversion. Such 
conditions shall include, but not be limited 
to. 

(a) A condition limiting purchases in the 
public offering or the direct community 
offering by any person together with any 
associate or group of persons acting in 
concert to a percentage of the total offer- 
ing of shares not exceeding live percent; 
except that any one or more tax-qualified 
employee stock benefit plans may pur- 
chase in the aggregate not more than ten 
percent of the total offering of shares and 
shall be entitled to purchase such amount 
regardless of the number of shares to be 
purchased by other parties, and that 
shares held by one or more tax-qualified 
employee stock benefit plans and attri- 
buted to a person shall not be aggregated 
with other shares purchased directly by 
or otherwise attributable to that person. 

(b) A condition requiring that orders for stock 
in any public offering or direct community 
offering shall first be filled u£ to a maxi- 
mum of two percent of the conversion 
stock and thereafter remaining shares shall 
be allocated on an equal number of shares 
basis per order until all orders have been 
filled. 

(c) A condition requiring the stock to be of- 
fered and sold in the public offering or the 
direct community offering to be offered 



non-tax-qualified employee stock benefit 
plans and attributed to a person shall not 
be aggregated with shares purchased directly 
bv or otherwise attributable to that person. 
For purpose of this Paragraph, the members 
of the converting savings bank's board of 
directors shall not be deemed to be associ- 
ates or a group of persons acting in concert 
solely as a result of their board membership. 
(8) Provide that no executive officer or direc- 
tor or any associate of an executive officer 
or director shall purchase without the prior 
written approval of the administrator the 
capital stock of the converted savings bank 
except from a broker or dealer registered 
with the Secretary' of State of North 
Carolina and/or the Securities and Exchange 
Commission for a period of three years fol- 
lowing the conversion, ['his provision shall 
not apply to negotiated transactions involv- 
ing more than one percent of the outstand- 
ing capital stock of the converted savings 
bank or to purchases of stock made by and 
held bv any one or more tax qualified or 
non-tax-qualified employee stock benefit 
plan which may be attributable to executive 
officers or directors. 

(9) Provide that the sales price of the shares of 
capital stock to be sold in the conversion 
shall be a uniform price determined in ac- 
cordance with Section .0700 of this Sub- 
chapter and specify the underwriting and /or 
other marketing arrangements to be made to 
assure the sale of all shares not sold in the 
subscription offering. 

( 10) Provide that each deposit account holder 
of the converting savings bank shall receive, 
without payment, a deposit account or ac- 
counts in the converted savings bank equal 
in amount to the value of such account 
holder's deposit account or accounts in the 
converting savings bank. 



and sold in a manner that will achieve the (11) Provide for the establishment and main- 

tenance of a liquidation account for the 
benefit ot eligible account holders and sup- 
plemental eligible account holders in the 
event of a subsequent complete liquidation 
of the converted savings bank, in accordance 
with the provisions of Rule .0315 of this 



widest distribution of the stock, 
(d) A condition that any direct community 
offenng by the applicant shall give a pref- 
erence to natural persons residing in the 
counties in which the applicant has an 
office. 

(7) Provide that the number of shares which 
any person together with any associate or 
group of persons acting in concert may sub- 
scribe or purchase in the conversion shall 
not exceed five percent of the total offering 
of shares; except that any one or more tax- 
qualified employee stock benefit plans may 
purchase in the aggregate not more than 10 
percent of the total offering of shares. 
Shares held bv one or more tax-qualified or 



tne £ 
Section. 

( 12) Provide for an eligibility record date which 
shall be not less than 90 days prior to the 
date of adoption of the plan bv the convert- 
ing savings bank's board of directors. 

(13) Provide that the holders of the capital 
stock of the converted savings bank shall 
have exclusive voting right v 

(14) Provide that the plan of conversion 
adopted by the applicant's board of directors 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1019 



PROPOSED RULES 



mav be substantively amended by such 
board of directors prior to the solicitation 
of proxies from members to vote on the plan 
and at any time thereafter with the concur- 
rence of the administrator; and that the 
conversion may be terminated by the board 
of directors at any time prior to the meeting 
of members called to consider the plan of 
conversion and at any time thereafter with 
the concurrence of the administrator. 



(15) F.stablish a time penod within which the 
conversion must be completed prior to ter- 
mination. This time penod shall be not 
more than 12 months from the date the 
members approve the plan of conversion. 
This time period may be extended an addi- 
tional L2 months with the written permis- 
sion of the administrator. 

( 16) Provide that all shares of capital stock 
purchased bv directors and executive officers 
on original issue in the conversion either di- 
rectly from the applicant (bv subscription 
or otherwise) or from an underwriter of such 
shares, shall be subject to the restriction that 
such shares shall not be sold, without writ- 
ten permission of the administrator, for a 
period of not less than one Near following 
the dale of purchase, except in the event of 
death of the director or executive officer. 

( 17) Provide that, in connection with shares of 
capital stock subject to restriction on sale 
under Paragraph ( 16) of this Rule: 

(a) Hach certificate for such stock shall bear a 
legend giving appropriate notice of the 
applicable restrictions; 

(b) .Appropriate instructions shall be issued to 
the transfer agent for the converted 
savings bank's capital stock with respect 
to applicable restrictions on transfer of 
anv restricted stock; and 

(c) Anv shares issued as a stock dividend, 
stock split or otherwise with respect to 
anv restricted stock shall be subject to the 
same restrictions as may apply to the re- 
stricted stock. 

(18) Provide that the converting savings bank 
shall: 



(a) use its best efforts to encourage and assist 
a market maker to establish and maintain 
a market for the securities issued in con- 



nection with the conversion; and 
(b) use its best efforts to hst those shares is- 
sued in connection with the conversion 
on a national or regional securities ex- 
change or on the NASDAQ system. 

( 19) Provide that the expenses incurred in the 
conversion shall be reasonable. 

(20) Contain no provision which the adminis- 
trator may determine to be inequitable or 



detrimental to the applicant, its account 
holders or other savings banks or to be 
contrary to the public interest. 

(21) Contain no provision which the adminis- 
trator finds will harm the community and 
public served by the savings bank. 

(22) Provide that the converting savings bank 
shall not loan funds or otherwise extend 
credit to any person to purchase the capital 
stock of the converting savings bank. 

(23) Provide that the savings bank may make 
scheduled discretionary' contributions to a 
tax-qualified employee stock benefit plan 
provided such contributions do not cause 
the savings bank to fail to meet its net worth 
requirements. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0312 OPTIONAL PROVISIONS IN PLAN OF 
CONVERSION 

The plan of conversion mav provide any or all 
of the following: 
(1) That the applicant mav commence the di- 
rect community offering or the public offer- 
ing, or both, concurrently with or at any 
time during the subscription offering. The 
subscription offering mav be commenced 
concurrently with or at any time after the 
mailing to members pursuant to Rule .0607 
of this Subchapter of the proxv statement 
authorized for use by the administrator. 
The subscription offering mav be closed be- 
fore the meeting of the members held to vote 
on the plan of conversion, provided that the 
otfer and sale of capital stock shall be con- 
ditioned upon the approval of the plan of 



conversion bv the members as provided in 
Section .0600 of this Subchapter. 
(2) That directors, officers, and employees of 
the converting association shall receive, 
without payment, nontransferable sub- 



scription rights to purchase shares of capital 
stock, to the extent that shares are available 
after satisfying the subscriptions of eligible 
account holders, supplemental eligible ac- 
count holders, and voting members provided 
for under Paragraphs (2). (4) and (5) of Rule 
.031 1 of this Section. The shares shall be 
allocated among directors, officers, and em- 
ployees on an equitable basis such as by 
giving weight to period of service, compen- 
sation, and position, subject to the limita- 
tion in Paragraph (7) of Rule .031 1 of this 
Section on the amount of shares which may 
be purchased by any person, associate 
thereof, or group of affiliated persons or 
group of persons otherwise acting in concert. 



1020 



6:15 NORTH CAROLINA REGISTER November 1, 1 99 1 



PROPOSED RULES 



(3) That anv account holder receiving rights 
to purchase stock in the subscription offer- 
ing shall also receive, without payment, 
nontransferable subscription rights to pur- 
chase up to one percent of the total offering 
of shares of capital stock, to the extent that 
such shares are available after satisfying the 
subscriptions provided for under Paragraphs 
(2), (4), and (5) of Rule .0311 of this Sec- 
tion, subject to such conditions as may be 
provided in the plan of conversion. In the 
event of an oversubscription for such addi- 
tional shares, the shares available shall be 
allocated among the subscribing eligible ac- 
count holders, supplemental eligible account 
holders, and voting members on such equi- 
table basis, related to the amounts of their 
respective subscriptions, as may be provided 
in the plan of conversion. 

(4) That the applicant may require members 
to return bv a reasonable date certain a 
postage-paid written communication pro- 
vided by the applicant requesting receipt of 
a subscription offering circular, or a prelimi- 
nary or final offering circular in an offering 
pursuant to Paragraph ( 10) of this Rule, in 
order to be entitled to receive an offering 
circular from the applicant; provided, that 
the subscription offering or the offering pur- 
suant to Paragraph ( 10) of this Rule shall 
not be closed until 30 davs after the mailing 
bv the applicant to members of the 
postage-paid writ ten communication. If the 
subscription offering or the offering pursuant 
to Paragraph ( 10) of this Rule is not com- 
menced within 45 davs after the meeting of 
members, any converting savings bank 
adopting this optional provision shall trans- 
mit not more than 30 davs prior to the 
commencement of the subscription offering 
or the offenng pursuant to Paragraph ( 10) 
of this Rule to each member who had been 
furnished with proxy solicitation materials, 
written notice of the commencement of the 
offering which notice shall state that the 
converting savings bank is not required to 
furnish an offering circular to a member un- 
less the member returns bv a reasonable date 
certain the postage-paid written communi- 
cation provided by the converting savings 
bank requesting receipt of an offenng circu- 
lar_ 

(5) That the applicant may require eligible 
account holders and supplemental eligible 
account holders who are not voting mem- 



cation in accordance with the procedure es- 
tablished in Paragraph (4) of this Rule. 
(6) Than any insignificant residue of shares of 
the converting savings bank not sold in the 
subscription offering or in a public offering 
or direct community offering may be sold in 
such other manner as provided in the plan 
of conversion with the written consent of the 
administrator. 



(7) That the number of shares which anv per- 
son or group of persons affiliated with each 
other or otherwise acting in concert may 
subscribe for in the subscription offering 
may be made subject to a limit of not less 
than one percent of the total offering of the 
shares. 

(8) That any person exercising subscription 
rights to purchase capital stock shall be re- 
quired to purchase a minimum number of 
shares but the aggregate price for anv mini- 
mum share purchase shall not exceed five 
hundred dollars ($500.00). 

(9) That the converted savings bank shall issue 
and sell, in lieu of shares of its capital stock, 
units of securities consisting of capital stock 
arid long-term warrants or other equity se- 
curities, in which event anv reference in the 
provisions of this Subchapter to capital 
stock shall apply to such units of equity sc- 
curities unless the context otherwise re- 



( 10) That, instead of a separate subscription 
offering, all subscription rights issued in 
connection with the conversion shall be 
exercisable by delivery of properly com- 
pleted and executed order forms to the 
underwriters or selling group for the public 
offenng or pursuant to anv other procedure, 
subject to the applicant demonstrating to the 
administrator the feasibility of the method 
of exercising such naht and to such condi- 



bers pursuant to Rule .0608 of this Sub- 
chapter to return bv a reasonable date 
certain a postage-paid wntten communi- 



tions as shall be provided in the plan of 
conversion. 

(11) That the administrator may approve such 
other equitable provisions as necessary to 
avert imminent iniury to the converting 
savings bank. 

(12) That the proxy statement required by Rule 
.0607 of this Subchapter may be in summary' 
form, provided: 

(a) A statement is made in bold-faced type on 
the summary proxy statement that a more 
detailed desenption of the proposed 
transaction may be obtained by returning 
an attached postage-paid postcard or 
other wntten communication requesting 
a supplemental information statement 
which, together with the summary proxy 
statement, complies with the requirements 



6:15 NORTH CAROLINA REGISTER November 1. 1991 



1021 



PROPOSED RULES 



(b) I he date 



(c) 



(d) 



of l ; orm PS contained in the .Application 
tor Conversion (Form AC), 

I lie date on which the summary proxy 
statement is mailed to members will be 
deemed the date on which notice is given 
for purposes of Rule .061)7 of this Sub- 
chapter. Without the pnor written con- 
sent of the administrator, the meeting of 
members shall not be held less than 20 
davs after the date on which the supple- 
mental information statement is mailed to 
requesting members. 

I he supplemental information statement 
required to be furnished to members pur- 
suant to Subparagraph (a) of this Para- 
graph may be combined with Form OC, 
if the subscription o tie ring is commenced 
concurrently with or during the prow so- 
licitation period pursuant to Paragraph ( 1 ) 
of this Rule. 

The form of the summary proxy statement 
has been approved by the administrator. 



Statutory Authority G.S. 54C-33; 54C-53. 

.0313 RECORD DATES FOR QUALIFYING 
DEPOSITS 

I nless otherwise provided in the plan of con- 
version, tor the purposes of this Section, the 
amount of the qualifying deposit of an eligible 
account holder or supplemental eligible account 
holder shall be the total of the deposit balances 
in the eligible account holder s or supplemental 
eligible account holder's deposit accounts in the 
converting savings hank as of the close of busi- 
ness on the eligibility record date or supplemental not ""the Tumving Tcpositorv 



.'liability record date. 1 lowever. the plan of 



plication of any of the net worth of the converted 
savings bank. 

(b) The liquidation account shall be main- 
tained by the converted savings bank for the 
benefit of eligible account holders and supple- 
mental eligible account holders who maintain 
their deposit accounts in the savings bank. Hach 
eligible account holder and supplemental eligible 
account holder shall, with respect to each deposit 
account held, have a related inchoate interest in 
a portion of the liquidation account balance 
("subaccount"). 

(c) In the event of a complete liquidation of the 
converted savings bank and only in such event, 
each eligible account holder and supplemental 
eligible account holder shall be entitled to receive 
a liquidation distribution from the liquidation 
account, in the amount of the then current ad- 
justed subaccount balances for deposit accounts 
then held, before any liquidation distribution 
may be made with respect to capital stock, except 
with respect to preferred stock issued in exchange 
for the surrender at the time of the conversion 
of mutual capital certificates issued bv the savings 
bank prior to conversion. Preferred stock issued 
in exchange for mutual capital certificates may 
receive distributions m liquidation pnor to those 
with respect to the liquidation account to the 
same extent that the holders of the mutual capital 
certificates would have been entitled to priority 
over the residual rights of depositors had the 
savings bank not been converted as of the date 
of liquidation. No merger, consolidation, pur- 
chase of bulk assets with assumption of deposit 
accounts and other liabilities, or similar trans- 
actions in which the converted savings bank is 

institution is con- 



conversion mav provide that anv deposit ac- 
counts with total deposit balances of less than 
tittv dollars ($50.00) or anv lesser amount shall 
not constitute a qualifying deposit. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0314 LIQUIDATION ACCOUNT 

(a) Each converted savings bank shall, at the 
time of conversion, establish a liquidation ac- 
count in_ an amount equal to the amount of net 
worth of the converting savings bank as of the 
latest practicable date prior to conversion. For 
the purpose of this Rule, the savings bank shall 
use the net worth figure set forth in its latest 
statement ot financial condition contained in the 
final ottering circular. The function of the liqui- 
dation account is to establish a priority on liqui- 
dation and, except as provided in Paragraph (f) 
ot this Rule, the existence of the liquidation ac- 
count shall not operate to restrict the use or ap- 



sidered to be a complete liquidation tor this pur- 
pose. In such transactions the liquidation 
account shall be assumed bv the surviving de- 
pository institution. 

(d) 1 he initial subaccount balance for a deposit 
account held bv an eligible account holder and or 
supplemental eligible account holder shall be de- 
termined bv multiplying the opening balance in 
the liquidation account bv a fraction of which the 
numerator is the greater of the amount of quali- 
fying deposits in such deposit account on the el- 
igibility record date and or the supplemental 
eligibility record date and the denominator is the 
total amount of qualifying deposits for all eligible 
account holders and supplemental eligible ac- 
count holders m the converted savings bank. 
Such initial subaccount balance shall not be bi- 
ased and shall be subject to downward ad- 



justment as provided in Paragraph (e) of this 
Rule. 

(e) If the balance in anv qualifying deposit ac- 
count of an eligible account holder or supple- 



1022 



6:15 NORTH CAROLINA REGISTER November I, 1991 



PROPOSED RULES 



mental eligible account holder at the close of 
business on any annual closing date subsequent 
to the date of conversion is less than the lesser 
of the deposit balance in the savings account at 
the close of business on any other annual closing 
date subsequent to the conversion date or the 
amount of qualifying deposit as of the eligibility 
record date or the supplemental eligibility record 
date, the subaccount balance for the savings ac- 
count shall be adjusted by reducing the subac- 
count balance in an amount appropriate to the 
reduction in the deposit balance. In the event 
of a downward adjustment, the subaccount bal- 
ance shall not be subsequently increased, 
notwithstanding any increase in the deposit bal- 
ance of the related savings account. Fhe con- 
verted savings bank shall not be required to 
recompute the liquidation account and subac- 
count balances provided the converted savings 
bank maintains records sufficient to make neces- 



When a converted savings bank merges with an 
existing stock savings institution the resulting 
savings institution will be treated as a converted 
savings institution and must comply with the 
provisions of Rules .0314 and .0315 of this Sec- 
tion and 4 NCAC 16A .0105. 



sary computations in the event of a complete 
liquidation or such other events as may require 
a computation of the balance of the liquidation 
account. The liquidation subaccount of an ac- 
count holder shall be maintained for as long as 
the account holder maintains an account with the 
same Social Security number. 

(f) No converted^ saving bank shall declare or 
pay a cash dividend on, or repurchase any of, its 
capital stock if the effect thereof would cause the 
net worth of the converted savings bank to be 
reduced below the amount required for the liq- 
uidation account. 

Statutoy Authority G.S. 54C-33; 54C-53. 

.0315 MANIPULATIVE AND DECEPTIVE 
DEVICES 

In the offer, sale, or purchase of securities issued 
incident to its conversion, no savings bank, or 
any director, officer, attorney, agent or employee 
thereof shall: 

( 1) employ any device, scheme, or artifice to 
defraud; or 

(2) obtain money or property bv means of any 
untrue statement of a material fact or any 
omission to state a matenal fact necessary in 
order to make the statements made, in the 
light of tjie circumstances under which they 
were made, not misleading; or 

(3) engage in any act, transaction, practice, or 
course of business which operates or would 
operate as a fraud or deceit upon a purchaser 
or seller. 



Statutory Authority G.S. 54C-33; 54C-53. 

.0316 MERCER OF CONVERTED SAVINGS 
BANKS 



Statutory Authority G.S. 54C-33; 54C-53. 

SECTION .0400 - NOTICE OF FILING: PLBLIC 
STATEMENTS: CONFIDENTIALITY 

.0404 INFORMATION PRIOR TO APPROVAL 
OF PLAN OF CONVERSION 

(a) A savings bank which is considering con- 
verting pursuant to this Subchapter and its di- 
rectors, officers, and employees shall keep such 
consideration in the strictest confidence and shall 
only discuss the potential conversion as would 
be consistent with the need to prepare informa- 
tion for filing an application for conversion. 
Should this confidence be breached the adminis- 
trator may requue remedial measures including: 

( 1) a pubhc statement by the savings bank 
that its board of directors is currently- 
considering converting pursuant to this 
Subchapter; 

(2) providing for an eligibility record date 
which shall be as of such a date prior to 
the adoption of the plan by the converting 
association's board of directors as to as- 
sure the equitability of the conversion; 

(3) limitation of the subscription rights of any 
person violating or aiding the violation of 
tins Section to an amount deemed appro- 
priate bv the administrator; and 

(4) any other action the administrator may 
deem appropriate and necessary to assure 
the fairness and equitability of the con- 
version. 

(b) If it should become essential as a result of 
rumors prior to the adoption of a plan of con- 
version bv the applicant's board of directors, a 
public statement limited to that purpose may be 
made by the applicant. 

(c) Promptly after the adoption of a plan of 
conversion by not less than two-thirds of its 
board of directors, the savings bank shall: 

( 1) Notify its members of such action bv 
publishing a statement in a newspaper 
haying general circulation in each com- 
munity in which an office of the savings 
bank is located and/or bv mailing a letter 
to each of its members; and 

(2) I lave copies of the adopted plan of con- 
version available for inspection bv its 
members at each office of the savings 
bank. The savings bank may also issue a 
press release with respect to such action. 



6:15 NORTH CAROLINA REGISTER November I. 1991 



1023 



PROPOSED RULES 



Copies of the statement, letter, and press 
release shall be filed with the administra- 
tor as a part of the application for con- 
version, 
(d) The statement, letter, and pres s release, 



unless otherwise authorized bv the administrator, 



shall be limited to, but need not contain all of, 
the following: 



(1) a statement that at least two-thirds of the 
board of directors has adopted a proposed 
plan to convert the savings bank from 
mutual to stock ownership; 

(2) a statement that the proposed plan of 
conversion must be approved bv at least 
a majority of the votes eligible to be cast 
either m person or bv proxy bv members 
at a meeting at which the plan will be 
submitted for their approval; 

(3) a statement that new proxies will be so- 
licited for voting on the proposed plan of 
conversion; 

(4) a statement that a proxy statement setting 
forth more detailed information with re- 
spect to the proposed plan of conversion 
will be sent to members prior to the 
meeting of members; 

(5) a statement that the proposed plan of 
conversion is subject to approval bv the 
administrator, before such plan can be- 
come ctfcctive and that members of the 
applicant mil have an opportunity to file 
written comments with the administrator, 
including any objections and materials 
supporting such objections: 

(6) a statement that the proposed plan of 
conversion is contingent upon obtaining 
favorable tax rulings or opinions; 

(7) a statement that there is no assurance that 
the approval of the administrator will be 
obtained, and also no assurance that fa- 
vorable tax rulings or tax opinions will be 
received] 

(8) the proposed record date for determining 
the eligible account holders entitled to re- 
ceive nontransferable subscription rights 
to purchase capital stock of the applicant; 

(9) a hnef statement describing the circum- 
stances that would require supplemental 
eligible account holders to receive 
nontransferable subscription rights to 
purchase capital stock of the applicant; 

( 10) a brief statement as to the extent to which 
voting members will participate in the 
conversion; 

(11) a brief description of the proposed plan 
of conversion: 

( 12) the approximate number of shares of 
capital stock to be issued and sold under 
the proposed plan oi conversion: 



(13) a brief statement as to the extent to which 
directors, otlicers, and empknees will 
participate in the conversion; 

(14) a statement that savings account holders 
will continue to hold accounts in the 
converted savings bank identical as to 
dollar amount, rate of return, and general 
terms, and that their accounts will con- 



tinuc to be insured bv the Federal Deposit 
Insurance Corporation; 

(15) a statement that borrower's loans will be 
unaffected bv conversion, and that the 
amount, rate, maturity, security and other 
conditions will remain contractually as 
thev existed prior to conversion; 

( 16) a statement that the normal business of 
the savings hank in accepting deposits and 
making loans will continue without inter- 
ruption; that the converted savings bank 
will continue after conversion to conduct 
its present services to savings account 
holders and borrowers under current pol- 
icies to be earned on in existing offices 
and bv the present management and staff; 

( 17) a statement that the proposed plan of 
conversion may be substantively amended 
bv the board of directors as a result of 
comments from the regulatory authorities 
or otherwise prior to the meeting, and that 
the proposed plan may also be terminated 
by the board of directors; and 

( 18) a statement that questions of members 
will be answered in the proxy material to 
be sent after the regulatory approvals of 
the proposed plan of conversion have 
been obtained and that any questions at 
this time may be answered bv telephoning 
or writing to the savings bank. 

(e) Such statement, letter, and press release 
shall not in any manner solicit proxies, include 



financial statements, or describe the benefits of 
conversion or the value of the capital stock of the 
savings bank upon conversion. In replying to 
inquiries, the savings bank should limit its an- 
gers to tli£ matters listed in Paragraph (d) of 



tlus Ruli 



Statutory Authority G.S. 54C-33; 54C-53. 

.0405 NOTICE OK FILING 

(a) Upon determination that an application for 
conversion is properly executed and is not mate- 
rially incomplete, the administrator will advise 
the applicant, in writing, to publish a notice ot 
the tiling o\_ the application. Promptly after re- 
ceipt of such advice, the applicant shall promi- 
nently post the notice m each of its offices and 
publish a notice of such filing in a newspaper 
having general circulation in each community in 



1024 



6:15 NORTH CAROLINA REGISTER November I, 1991 



PROPOSED RULES 



which an office of the applicant is located, as 
follows: 

NOTICE OF FILING OF AN 

APPLICATION FOR CONVERSION 

TO A STOCK SAVINGS BANK 



Notice is hereby given that, pursu- 
ant to General Statute 54C-33, 



(fill in name of applicant) 
has filed an application with the ad- 
ministrator of the Savings Insti- 
tutions Division for approval to 
convert to the stock form of organ- 
ization. Copies of the application 
have been delivered to the Savings 
Institutions Division, 1110 Navaho 
Drive, Suite 301, Raleigh, North 
Carolina, 27609. 

Written comments, including any 
objections to the plan of conversion 
and materials supporting such ob- 
jections, from any member of the 
applicant or any aggrieved person will 
be considered by the administrator if 
filed within 10 business days after the 
date of this notice. Failure to make 
such written comments or objections 
may preclude the pursuit of any ad- 
ministrative or judicial remedies. 
Any comments or objections should 
be sent to the administrator at the 
address noted above. The proposed 
plan of conversion and any com- 
ments thereon will be available for 
inspection bv any member of the ap- 
plicant at the office of the adminis- 
trator. A copy of the plan may also 
be inspected at each office of the ap- 
plicant. 

(b) If a significant number of the applicant's 
members speak a language other than I-nglish 
and a newspaper in that language is published in 
the area served bv the applicant, an appropriate 
translation of the notice shall also be published 
in that newspaper. 

(c) Promptly after publication of the notice 
prescribed in Paragraph (a) of this Rule, the ap- 
plicant shall file a copy of the notice with the 
administrator. The applicant shall also file a 
copy of an affidavit of publication from each 
newspaper publisher. 

Statutory Authority G.S. 54C-33; 54C-53. 

SECTION .0500 - SOLICITATION OF PROXIES: 
PROXY STATEMENT 



.0509 SOLICITATIONS TO WHICH RULES 
APPLY 

This Section applies to every solicitation of a 
proxy from a member of a savings bank for the 
meeting at which a plan of conversion will be 
voted upon, except the following: 

(1) any solicitation made otherwise than on 
behalf of the management of the savings 
bank where the total number of persons so- 
licited is not more than 50; 

(2) any solicitation through the medium of a 
newspaper advertisement which informs 
members, following approval of the plan of 
conversion, of a source from which they 



may obtain copies of a proxy statement, 
form of proxy, or any other solicitation ma- 
terial and does no more than: 



(a) 



name the savings bank, 



state the reason for the advertisement. 



identify the proposal or proposals to be 
acted upon by members, and 
urge members to vote at the meeting. 



Statutory Authority G.S. 54C-33; 54C-53. 

.0510 USE OF PROXY SOLICITING 

MATERIAL TO BE AUTHORIZED 

No proxy solicitation material required to be 
filed with the administrator prior to use shall be 
furnished to members or otherwise released for 
distribution until the use of such material has 
been authorized in writing bv the administrator. 
Proxy materia] authorized for use by the admin- 



istrator shall be mailed to the members within 
10 davs of such authorization unless extended by 
the administrator in writing. 



Statutory Authority G.S. 54C-33: 54C-S3. 



.0511 INFORMATION TO BE FURNISHED 
MEMBERS 

No solicitation shall be made unless each person 
solicited is concurrently furnished, or has previ- 
ously been furnished, a written proxy statement 
the use of which has been authorized in writing 
bv the administrator. 



Statutory Authority G.S. 54C-33; 54C-53. 

.0512 REQUIREMENTS AS TO PROXY 

(a) The form of proxy shall: 

( 1) indicate m bold face type whether the 
proxy is solicited on behalf of manage- 
ment; 

(2) provide specifically designated blank 
spaces tor dating and signing the proxy; 

(3) identify clearly and impartially each matter 
or group of related matters intended to be 
acted upon; 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1025 



PROPOSED RULES 



(4) be clearly labeled "Revocable P 



roxv 



bold face 1 \ pe of at least IS point; 

(5) desenbe any charter or state law require- 
ment restricting or conditioning voting bv 
prow; 

(6) contain an acknowledgement bv the per- 
son giving the prow that the person has 
received a prow statement prior to signing 
the form of prow; 

(7) contain the date, time, and place of meet- 
ing, if practicable; 

(8) provide, bv a box or otherwise, a means 
whereby the person solicited is afforded 
an opportunity to specify bv ballot a 
choice between approval or disapproval 
of each matter intended to be acted upon; 
and 

(9) indicate in bold face type how the prow 
shall be voted on each such matter if no 
choice is specified. 

(b) No prow obtained pursuant to the con- 
version shall confer authority to vote at any 
meeting other than the meeting, or any 
adjournment thereot. to vote on the plan of 
conversion. A prow mav be deemed to confer 
authority to vote with respect to matters incident 
to the conduct of such meeting. If the plan of 
conversion is considered at an annual meeting, 
existing proxies mav be voted with respect to 
matters not related to the plan ol_ conversion. 

(O The prow statement or fonn of prow shall 
provide that the votes represented bv the proxy 
will be voted. Where the person solicited speci- 
fies bv means of a ballot provided pursuant to 
Subsection (a)(8) of this Rule a choice with rs> only and shall not be deemed available for public 



radio or television scripts, to be used or furnished 
to members subsequent to furnishing the proxy 
statement, shall be filed with the administrator 
at least five business davs pnor to the date on 
which the administrator is requested to authorize 
the use of such material. Speeches mav, but need 
not, be tiled with the administrator pnor to use. 

(c) A copy of the proxv statement and a copy 
of the fonn of proxy and all other solicitation 
material, in the form in which such matenal is 
furnished to members, shall be tiled with or 
mailed for tiling to the administrator not later 
than the date such matenal is first sent or given 
to members. All materials filed pursuant to this 
Paragraph shall be accompanied bv a statement 
of the date on which copies of such materials are 
to be released to members 

(d) If the solicitation is to be made in whole 
or m part bv personal solicitation, a preliminary 
copy of all written instructions or other matenal 
which discusses or reviews, or comments upon 
the ments of. any matter to be acted upon and 
which is to be furnished to the individuals mak- 
ing the actual solicitation for their use directly or 
indirectly in connection with the solicitation shall 
be filed with the administrator at least live busi- 



ness davs pnor to the date on which the admin- 
istrator is requested to authorize the use of such 
matenal. 

(e) All preliminary copies of material filed 
pursuant to Paragraphs (a). (b|. and (d) of this 
Rule shall be clearly marked on the cover page 
"Preliminary Copy." Such preliminary copies 
shall be for the information of the administrator 



spect to any matter to be acted upon, the votes 
will be voted in accordance with the specifica- 
tions. If no choice rs specified, the votes will be- 
east as indicated in bold face type on the fonn 
of prow. 

(d) Notwithstanding any other provisions of 
this Rule, the proxv mav be in a form previousl' 
obtained from a voting member and conferring 
general authority to vote on any and all matters 
at anv meeting of the members or other authontv 



inspection except that such matenal may be dis- 
closed to anv department or agency of the United 
States government or appropnate state agency . 
I he administrator may make such inquines or 
iinestigation in regard to the matenal as mav be 
necessary for an adequate review, 
(f) Unless requested bv the administrator. 



to vote on matters to be presented at_ toe special 
meeting; provided, that such voting member has 
been tumished a proxv statement and the voting 
member does not grant a later-dated prow to 
vote at the meeting to consider the plan of con- 



corbies of replies to inquines from members and 
copies of communications which do no more 
than request that forms of proxy theretofore so- 
licited be signed and returned need not be tiled 
pursuant to this Rule. 

(g) Where anv prow statement, form of proxy 
or other material tiled pursuant to this Rule is 
amended or revised, a copy of such amended or 



version or attend the meeting and vote in person. revised matenal filed with the administrator shall 

be marked to indicate clearly and precisely the 
changes effected subsequent to the previous fil- 
ing. 



Statutory Authority G.S. 54C-33: 54C-53. 

.0513 MATERIAL REQUIRED TO BE HIED 

(a) Applicants shall file a preliminary copy of 
the prow materials required by Fonn AC. 

lb) A preliminary copy of anv additional so- 
licitation matenal including press releases and 



Statutory Authority G.S. 54C-33; 54C-53. 

.0514 MAILING COMMUNICATIONS FOR 
MEMBERS 



1026 



6:15 NORTH CAROLINA REGISTER November /, 1991 



PROPOSED RULES 



If the applicant has adopted a plan of conver- 
sion, the applicant shall perform such of the fol- 
lowing acts as may be duly requested in writing 
with respect to a matter to be considered at the 
meeting to vote on the plan of conversion by any 
member who will defray the reasonable expenses 
to be incurred by the applicant in the perform- 
ance of the act or acts requested: 
(1) The applicant shall mail or otherwise fur- 
nish to such member the following infor- 
mation as promptly as practicable after the 
receipt of such request: 

(a) a statement of the approximate number 
of members who have been or are to be 
solicited on behalf of management, or any 
group of members which the member 
shall designate; 

(b) an estimate of the cost of mailing a speci- 
fied proxy statement, form of proxy, or 
other commumcation to such members. 



by the Administrator that such material is accu- 



(2) Copies of any proxy statement, form of 
proxy, or other communication furnished 
by the member and as approved by the ad- 
ministrator shall be mailed by the applicant 
to such of the members specified in Para- 
graph ( l)(a) of this Rule as the member may 
designate. 

(3) Any such material which is furnished by the 
member shall be mailed with reasonable 
promptness by the applicant after receipt of 
the material to be mailed, including envel- 
opes or other containers, and the appropri- 
ate postage or payment for postage. 

(4) Neither management nor the applicant shall 
be responsible for such proxy statement, 
form of proxy, or other communication. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0515 FALSE OR MISLEADING STATEMENTS 

(a) No solicitation of a proxy by the applicant, 
its management, or any other person for the 
meeting to vote on the plan of conversion shall 



be made by means of any proxy statement, form 
of proxv, notice of meeting, or other communi- 
cation, written or oral, containing any statement 
which, at the time and in the light of the cir- 
cumstances under which it is made, is false or 
misleading with respect to any material fact , or 
which omits to state any mat end fact necessary 
in order to make the statements therein not false 
or misleading or necessary to correct any state- 
ment in any earlier communication with respect 
to the solicitation of a proxv for the meeting 
which has become false or misleading. 

(b) The fact that a proxy statement, form of 
proxv, or other solicitation material has been 
filed with or examined bv the administrator and 
authorized for use shall not be deemed a finding 



rate or complete or not false or misleading, or 
that the administrator has passed upon the merits 
of or approved any proposal contained therein. 
No representation to the contrary shall be made 
bv any person. 

(c) If a solicitation by management violates any 
provision of this Rule, the administrator may re- 
quire remedial measures including: 

( 1) correction of any such violation by means 
of a retraction and new solicitation, 

(2) rescheduling of the meeting for a vote on 
the plan of conversion, and 

(3) any other actions the administrator may 
deem appropriate under the circumstances 
in order to ensure a fair vote. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0516 PROHIBITION OF CERTAIN 
SOLICITATIONS 

No person soliciting a proxy from a member for 
the meeting to vote on the plan of conversion 
shall solicit: 

( 1) any updated or post-dated proxv; or 

(2) any proxy which provides that it shall be 
deemed to be dated as of any date subse- 
quent to the date on which it is signed by the 
members; or 

(3) any proxy which is not revocable at will by 
the member giving it^ or 

(4) any proxv which is part of any other docu- 
ment or instrument, such as an account 
card. 



Statutory Authority G.S. 54C-33; 54C-53. 
SECTION .0600 - VOTE BY MEMBERS 

.0606 VOTE AT MEMBERS MEETING 

Following approval of the plan of conversion 
bv the admimstrator, the plan of conversion shall 
be submitted for consideration to an annual or 
special meeting of members. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0607 NOTICE TO MEMBERS 

Notice of the meeting to consider a plan of 

conversion shall be given by means of the proxy 

statement authorized for use by the administra- 
tor. . - - -- - 

Statutory Authority G.S. 54C-33; 54C-53. 

.0608 ELECTIVE NOTICE TO NON-VOTING 
ACCOUNT HOLDERS 

The applicant may give notice in accordance 
with this Subchapter of the proposed conversion 
and the meeting of the members bv letter or 



6:15 NORTH CAROLINA REGISTER November I, 1991 



1027 



PROPOSED RULES 



other written communication authorized for use 
bv the administrator to eligible account holders 
and supplemental account holders who are not 

voting members. 

Statutory- Authority G.S. 54C-33; 54C-53. 

SECTION .0700 - PRICING AND SALE OF 
SECURITIES 

.0712 GENERAL 

(a) No offer to sell securities of an applicant 
pursuant to a plan of conversion m;iv be made 
prior to approval bv the administrator of the plan 
of conversion and until the prow statement has 
been authorized for use bv the administrator. 
No sale of securities may be made except bv 
means of a final offering circular which meets the 
requirements of this Section and which has been 
declared effective by the administrator. The 
provisions of this Rule shall not apply to pre- 
liminary negotiations or agreements between an 
applicant and anv underwriter or among under- 
writers who are to be in privity of contract with 
the applicant. 

(b) If the financial statements in a filing are in 



excess of 133 davs prior to the date of the ad- 
ministrator s approval of the plan of conversion, 
an interim financial statement as of a date within 
135 davs of such approval shall be furnished. 
This interim financial statement shall be at least 
as current as the most recent quarterly financial 
statement filed with the administrator. This m- 
terim financial statement may be unaudited. 



PROXY STATEMENTS 

If the offering is to commence prior to the 
meeting of the members held to vote on the plan 
of conversion, the prow statement authorized for 
use bv the administrator shall set forth the esti- 
mated price range. Anv preliminary offering cir- 
cular shall set forth the estimated price range. 
The maximum of such price range should 
normally be not more than fifty dollars ($50.00) 
per share or \_5 percent above the average of the 
minimum and maximum of such price range and 
the minimum should normally be no less than 
five dollars ($5.00) per share or no more than 15 
percent below such average. 

Statutory Authority G.S. 34C-33; 54C-53. 

.0715 PROHIBITED REPRESENTATIONS 

The administrator will review the price infor- 
mation required under this Section in determin- 
ing whether to give approval to the plan of 
conversion when the offering is to commence 
prior to the meeting of the members, and the 
administrator will review the information in de- 
termining whether to declare a final offering cir- 
cular effective. No representations may be made 
in anv manner that the pric e information has 



Statutory Authority G.S. 54C-33; 54C-53. 

.0713 DISTRIBUTION OF OFFERING 
MATERIALS 

Anv preliminary offering circular which has 
been filed with the administrator may be distrib- 
uted in connection with the offering at the same 
time as or after the proxv statement is mailed to 
members pursuant to Rule .0607 of this Sub- 
chapter. No final offering circular shall be dis- 
tributed until it has been declared effective bv the 
administrator. The declaration of the effective- 
ness of the final offering circular bv the adminis- 



trator shall not extend bevond the maximum 
time period specified for the completion of the 
sale of all the capital stock in Rule .0721 of this 
Section, or beyond such period of time the ad- 
ministrator shall establish upon a subsequent 
declaration of effectiveness in the event of the 
granting of an extension of time under Rule .0723 L=l 

of this Section. 



been approved bv the administrator or that the 
shares of capital stock sold pursuant to the plan 
of conversion have been approved or disap- 
proved bv the administrator or that the adminis- 
trator has passed upon the accuracy or adequacy 
of anv offenng circular covering such shares. 



Statutory Authority G.S. 54C-33; 54C-53. 

.0716 UNDERWRITING EXPENSES 

I 'ndcrwriting commissions shall not exceed an 
amount or percentage per share accepted as rea- 
sonable bv the administrator. The term "under- 
writing commissions" includes underwriting 
discounts. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0717 PRICING MATERIALS 

(a) In considering the pricing information re- 
quired under Rule .0714 of this Section, the ad- 
ministrator will apply the following guidelines: 
( 1 ) The materials shall be prepared bv persons 
independent of the applicant who are ex- 
perienced and expert in the area of cor- 
porate appraisal. 
(2) The materials shall contain a brief sum- 



Statutory Authority G.S. 54C-33: 54C-53. 
.0*14 ESTIMATED PRICE INFORMATION: 



man,' of data that is sufficient to support 
the conclusions reached therein. 
(3) To the extent that the appraisal is based 
on the capitalization of the oro forma in- 
come of the converted savings bank, the 



1028 



6:15 \ORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



materials must indicate the basis for de- 
termination of the income to be derived 
from the proceeds of the sale of stock and 
demonstrate the appropriateness of the 
earnings multiple used, including assump- 
tions made as to future earnings growth. 
To the extent that the appraisal is based 
on a comparison of the capital stock of 
the apphcant with the outstanding capital 
stock of existing stock savings banks, the 
existing stock savings banks must be rea- 
sonably comparable to the apphcant in 
terms of such factors as size, market area, 
competitive conditions, profit history, and 
expected future earnings. 

(b) In addition to the information required in 
Paragraph (a) of this Rule, the applicant shall 
submit information demonstrating to the satis- 
faction of the administrator the independence 
and expertise of any person preparing materials 
under this Rule and the person must be accepta- 
ble in these respects to the administrator. A 
person will not be considered as lacking inde- 
pendence for the reason that such person will 
participate in effecting a sale of capital stock un- 
der the plan of conversion or will receive a fee 
from the applicant for services rendered in con- 
nection with such appraisal. 

(c) In addition to the information required in 
Paragraphs (a) and (b) of this Rule, the applicant 
shall tile with the administrator such additional 
information with respect to the pricing of the 
capital stock of the applicant as the administrator 



case may be, and a set of detailed instructions 



may request, including, without limitation, a full order form shall: 
appraisal. 



explaining how to properly complete the order 
forms. The offering circular and order form in- 
structions may be included in the same docu- 
ment. 

(c) The maximum subscription price stated on 
each order form shall be the amount to be paid 
when the order form is returned. The maximum 
subscription price and the actual subscription 
price shall be within the subscription price range 
stated in the administrator's approval and the 
offering circular. If either the maximum sub- 
scription price or the actual subscription price is 
not within such subscription price range, the ap- 
phcant must obtain the written consent of the 
administrator. If appropriate, the administrator 
wiU condition the amended approval by requiring 
a resolicitation of proxies and/or order forms. If 
the actual public offering price is less than the 
maximum subscription price stated on the order 
form, the actual subscription price shall be cor- 
respondingly reduced and the difference shall be 
refunded to those who have paid the maximum 
subscription price, unless the subscribers 
affirmatively elect to have the difference applied 
to the purchase of additional shares of capital 
stock. 

(d) Fach order form shall be prepared so as to 
indicate to the person receiving it^ in as simple, 
clear, and intelligible a manner as possible, the 
actions which are required or available to him 
with respect to the form and the capital stock 
offered for purchase thereby. Specifically, each 



Statutory Authority G.S. 54C-33; 54C-53. 

.0718 ORDER FORMS FOR PLRCHASE OF 
CAPITAL STOCK 

(a) Promptly after the administrator has de- 
clared effective the offering circular for the sub- 
scription offering, the applicant shall distribute 
order forms for the purchase of shares of capital 
stock in the offering to all eligible account hold- 
ers, supplemental eligible account holders [if ap- 
plicable), voting members and other persons who 
may subscribe for such shares of capital stock 
under the plan of conversion. If the applicant 
has adopted in its plan of conversion the optional 
provisions set forth in Paragraphs (4), (5) or ( 10) 
of Rule .0312 of this Subchapter, the apphcant 
shall deliver order forms to the eligible account 
holders, supplemental eligible account holders 
and voting members who requested receipt of the 
offenng circular. 

(b) Each order form shall be accompanied or 
preceded by the final offenng circular for the 
subscription offenng or the public offenng, as the 



( 1) indicate the maximum number of shares 
which may be purchased pursuant to the 
subscription offering; 

(2) indicate the period of time within which 
the subscription rights must be exercised, 
which penod of time shall not be less than 
20 days and no more than 45 days fol- 
lowing the date of the mailing of the sub- 
scription offering order form; 

(3) state the maximum subscription price per 
share of capital stock; 

(4) indicate any requirements as to the mini- 
mum number of shares of capital stock 
which must be purchased; 

(5) provide a specifically designated blank 
space or spaces for indicating the number 
of shares of capital stock which the eligi- 
ble account holder or other person wishes 
to purchase; 

(6) indicate the manner of required payment 
and, if such payment may be made by 
withdrawal from a certificate of deposit, 
indicate that such withdrawal may be 
made without penalty. If payment is to 
be made by a withdrawal from a deposit 



6:15 NORTH CAROLINA REGISTER November I, 1991 



1029 



PROPOSED RULES 



account or certificate of deposit, a box to 
check should be provided; 

provide specifically designated blank 
spaces for dating and signing the order 
form; 



community marketing, shall be completed as 
promptly as possible and within 45 calendar days 
after the last day of the subscription period, un- 
less extended in writing by the administrator. 



[21 

(Si contain an acknowledgement by the ac_- Statutory Authority G.S. 54C-33; 54C-53 



count holder or other person signing t he- 
order form that the person has received 
the final offering circular for the sub- 



tii 



script ion offering prior to signing the or- 
der form: and 

indicate the consequences of failing to 
properly complete and return the order 
form, including a statement that the sub- 
scription rights are nontransferable and 
will become void at the end of the sub- 
scription penod. 1 he order lorm may, 
and the set of instructions shall, indicate 
the place or places to which the order 
forms are to be returned and when the 
order forms shall be deemed to be re- 
ceived, 
(c) The order form may provide that it may not 
be modified without the applicant's consent alter 
the order form has been returned to the appli- 
cant . |f payment is to be made bv withdrawal 
from a deposit account or certificate of deposit, 
the applicant m,i\ . but need not, cause such 
withdrawal to be made upon receipt of the order 
form. If such withdrawal is made at any time 
prior to the closing date of the public offering, 
the applicant shall pay interest to the account 
holder on the amount withdrawn as if such 
amount had remained in the account from which 
it was withdrawn until the closing date. 



.0721 INTEREST: SUBSCRIPTION/ 

COMMUNITY PURCHASE ORDERS 

The applicant shall pay interest at not less than 
the passbook rate on all amounts paid in cash 
or by check or money order to the savings bank 
to purchase shares of capital stock in the sub- 
scription offering or direct community offering 
from the date payment is received bv the appli- 
cant until the conversion is completed or termi- 
nated. 

Statutory Authority G.S. 54C-33; 54C-53. 



.0722 EXTENSIONS OF TIME TO COMPLETE 
OFFERINGS 

(a) The administrator mav grant one or more 
extensions of time required to complete the sale 
of a_H shares of capital stock under Rule .0721 of 
this Section, provided that no single extension of 
time shall exceed 90 days. 

(b) Immediately upon the granting of an ex- 
tension of time pursuant to Paragraph (a) of this 
Rule, the applicant shall distribute to each sub- 
scriber in the offering, and, if applicable, each 
person who has ordered stock in the direct com- 
munity offering, a post -effective amendment to 
the offering circular filed under an amendment to 
the application for conversion and declared ef- 
fective by the administrator pursuant to Para- 
graph (d) of this Rule which shall notify each 
subscriber and each ordering person of the 
granting of the extension of time, and of the right 
of each subscriber and each ordering person to 
increase, decrease, or rescind his subscription ei- 
ther at any time prior to 20 davs before the end 
of the extension penod or at any time prior to the 
date ot the commencement ot the public offering 
or the direct community ottering, provided that 
if the public offermg or the direct community 
offering is not completed within 20 days alter its 
commencement, all instructions front subscribers 
and ordering persons to increase, decrease or 
rescind their subscriptions or orders received 
during the 20-day offering penod shall be hon- 
ored bv the applicant. 

lc) lor the purpose of this Rule, the public 
ottering shall be deemed to commence upon the 
filing with the administrator of the preliminary 
offering circular for the public offering. The di- 
rect community offering shall be deemed to 
commence upon the declaration of etlectiveness 
including any sale in a public offering or direct bv the administrator of the final offering circular. 



Statutory Authority G.S. 54C-33; 54C-53. 

.0719 WITHDRAWAL FROM CERTIFICATE 
ACCOUNTS 

Notwithstanding any regulatory provision re- 
garding penalties for early withdrawal from cer- 
tificate accounts, the applicant mav allow 
payment tor capital stock pursuant to the exer- 
cise of subscription rights bv withdrawal from a 
certificate account without the assessment of 
such penalties. In the case of early withdrawal 
of only a portion ot such account, the certificate 
evidencing such account shall be cancelled if the 
applicable minimum balance requirement ceases 
to be met. The remaining balance will earn in- 
terest at the passbook rate. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0720 PERIOD FOR COMPLETION OF SALE 

The sale of ah shares of capital stock of the ap- 
plicant to be made under the plan of conversion. 



1030 



6:15 SORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



(d) After the expiration of the subscription 
rights, the converting savings bank shall file with 
and have declared effective by the administrator 
a post-effective amendment to the offering circu- 
lar upon the occurrence of any event , circum- 
stance, or change of circumstance which would 
be material to the investment decision of a sub- 
scriber or, if applicable, a person who has ordered 
capital stock in the direct community offering. 

(e) Any post-effective amendment to an offer- 
ing circular shall be distributed by the converting 
savings bank immediately after the declaration 
of effectiveness. It shall be distributed to each 
subscriber, and, if applicable, each person who 
has ordered stock in the direct community offer- 
ing. The converting savings bank shall grant to 
each subscriber and ordering person the right to 
increase, decrease, or rescind his subscription or 
order for a period which shall be the greater of 
10 davs from the date of the mailing of the post- 
effective amendment or the period remaining in 
an extension of time granted by the administrator 
pursuant to the provisions of Paragraph (b) of 
this Rule. 

Statutory Authority G.S. 54C-33; 54C-53. 

SECTION .0800 - PROCEDURAL 
REQUIREMENTS 

.0822 IMPROPERLY EXECUTED OR 

MATERIALLY INCOMPLETE FILINGS 

(a) Any application for conversion that is im- 
properly executed shall not be accepted for filing 
and shall be returned to the applicant. 

(b) Subject to the provisions of Paragraph (c) 
of this Rule, any application for conversion that 
does not contain copies of a plan of conversion, 
a preliminary proxy statement with signed finan- 
cial statements, and a preliminary form of proxy, 
shall not be accepted for tiling and shall be re- 
turned to the applicant. Any application for 
conversion containing a materially incomplete 
plan of conversion, prox y statement, or form of 



proxy may be returned to the applicant. 

(c) Any application for conversion which con- 
tains, at a minimum, a materially complete plan 
ot conversion shall be accepted for tiling if the 
application is accompanied by the written request 
of the applicant that the application not be re- 
viewed bv the administrator until the applicant 
requests and the administrator consents to the 
filing of the additional materials set forth in Par- 



agraph (b) of this Rule. 
Statutory Authority G.S. 54C-33; 54C-53. 
.0823 ADDITIONAL FILING REQUIREMENTS 



An applicant whose plan of conversion has been 
approved bv the administrator shall fulfill the 
following requirements: 
( 1) The applicant shall file with the adminis- 
trator promptly after the meeting of mem- 
bers called to consider the plan of 



(Si 

(£) 

Id) 



conversion a certified copy of each resol- 
ution adopted at the meeting relating to the 
plan of conversion, together with the fol- 
lowing information: 



the total number of votes eligible to be 
cast, 

the total number of votes represented in 
person or by proxy at the meeting, 
the total number of votes cast in favor of 
an against each such matter, and 
the percentage of votes necessary to ap- 
prove each such matter. 
The compilation of the votes cast at the 
meeting may be prepared by an independ- 
ent public accountant or by an independent 
transfer agent. 



(2) The applicant shall file with the adminis- 
trator, promptly after the meeting of mem- 
bers called to consider the plan of 
conversion, an opinion of counsel to the ef- 
fect that: 
(a) the meeting of members was duly held in 
accordance with all requirements of ap- 
plicable state and federal law and regu- 
lation; 



Oil 



[£l 



all requirements of state and federal law 
applicable to the conversion have been 
complied with: and 

if the savings bank has used proxies exe- 
cuted prior to the proxy solicitation re- 
quired bv Rule .1)51 1 of this Subchapter, 
the authority conferred bv such proxies 
includes authority to vote on this plan of 



conversion. 



(3) F.ach offering circular for the offering shall 
be prepared in compliance with this Sub- 
chapter. The applicant shall file with the 
administrator a copy of each preliminary 
offering circular and a copy of each final of- 
fering circular. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0824 NUMBER OF COPIES, PLACE OF 
FILING, BINDING, SIGNATURES 

(a) Every application and every amendment 
thereto tiled shall be manually signed by: 

( 1) a duly authonzed representative of the 
applicant on its behalf, 

(2) its principal executive officer, 

(3) its principal financial officer, 

(4) its principal accounting officer, and 

(5) at least two-thirds of its directors. 



6:15 NORTH CAROLINA REGISTER November I, 1991 



ion 



PROPOSED RULES 



(b) If any name is signed to an application or 
anv amendment thereto pursuant to a power of 
attorney, a manually signed copy of such power 
of attorney shall be tiled with the application. 

lei I xcept as provided in Paragraph (d) of this 
Rule, the tiling of any application or amendment 
thereto under this Subchapter shall constitute a 
representation of the applicant bv its duly au- 
thorized representative, the applicant's principal 
executive officer, the applicant's principal finan- 
cial officer, and the applicant's principal ac- 
counting officer, and each member of the 
applicant's board of directors (whether or not 
>uch directors has signed the application or anv 
amendment thereto ) severally that: 

( 1 1 He or she has read such application or 
amendment: 

(2) In the opinion of each such person, he or 
she has made such examination and in- 
vestigation as is necessary to enable him 
or her to express an informed opinion that 
such application or amendment complies 
to the best of his or knowledge and belief, 
with the applicable requirements of this 
Subchapter and forms prescribed here- 
under: and 

(3) Fach such person - holds such informed 
opinion. 

(d) The representations specified in Paragraph 
(c) of this Rule shall not be deemed to have been 
made bv anv director of the applicant who did 
not sign the application or anv amendment 
thereto, if an onlv to the extent that such director 
file; with the administrator within 10 business 
davs after the tiling of the application or amend- 
ment a statement describing those portions of 
anv filing with which there is no such represen- 
tation. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0825 REQUIREMENTS AS TO PAPER AND 
PRINTING 

(a) Applications shall be tiled on good quality, 
un dazed, white paper approximately S- ' \ bv L3 
or S- ' ; bv U_ inches in size, insofar as practica- 
ble. However, tables, charts, maps, and financial 
statements mav be on larger paper if folded to 
such sizes. Plan of conversion, proxv statement, 
and offering circular may be cm smaller paper if 
the applicant so desires 

(b) Applications and, insofar as practicable, all 
papers and documents tiled as part thereof shall 
be printed, lithographed, mimeographed, or 
typewritten. However, applications or anv por- 
tion thereof mav be prepared bv anv similar 
process which, in the opinion of the administra- 
tor, produces copies suitable for a permanent re- 



cord. Irrespective of the process Used, all copies 
of anv such material shall be clear, easily read- 
able, and suitable for repeated photocopying. 
Debits in credit categories and credits in debit 
categories shall be designated so as to be clearly 
distinguishable as siicli on photocopies. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0826 METHOD OF PREPARATION 

Every application shall furnish information in 
item-and-.insv. er torm in response to the items 
of the appropriate form and shall include the 
captions of the form but omit the text of all items 
and instructions. Fverv proxy statement and of- 
fering circular shall present information as pro- 
vided in Rule .082^ of this Section in response 
to the items of the appropriate form in lieu of 
furnishing the information in item-and-answer 
form and shall omit the captions and text of all 
items and instructions. very application shall 
include a cross reterence sheet showing the lo- 
cation in the proxv statement and offering circu- 
lar of the response to the items of the appropriate 
form. If anv such item is inapplicable or the 
answer thereto is in the negative and is omitted. 



a statement to that effect shall be made in the 
cross reterence sheet. 

Statutory Authority G.S. 54C-33: 54C-53. 

.0827 INFORMATION UNKNOWN OR NOT 
REASONABLY AVAILABLE 

Required information need be given onlv inso- 
far as it is known or reasonable available to the 
applicant. ]f anv required information is un- 
known and not reasonably available to the ap- 
plicant, either because obtaining it would involve 
unreasonable effort or expense, or because it rests 
peculiarly within the knowledge of another per- 
son not affiliated with the applicant, the infor- 
mation mav be omitted, subject to the following 
conditions: 
( 1 ) 1 he applicant shall give such information 
on the subject as it possesses or can acquire 
without unreasonable effort or expense, to- 
gether with the source thereof: 
(2) 1 he applicant shall include a statement ei- 
ther showing that unreasonable effort or ex- 
pense would be involved or indicatmg the 
absence of anv affiliation with the person 
within whose knowledge the information 
rests and stating the result of a request made 
to such person for the information. 

Statutory Authority G.S. 54C-33: 54C-53. 

.0828 INCORPORATION OF CERTAIN 
INFORMATION BY REFERENCE 



1032 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



(a) Where an item in an application calls for 
information not required to be included in the 
proxy statement or offering circular, matter con- 
tained in any part of the apphcation, including 
exhibits, may be incorporated by reference in 
answer, or partial answer, to such items. No in- 
formation may be incorporated by reference in a 
proxy statement or offering circular, unless the 
document containing such information is at- 
tached thereto or is summarized or outlined. 
However, an offering circular may incorporate 
by reference the information contained in a proxy 
statement previously delivered without need of 
summary or outline. 

(b) Material incorporated bv reference shall be 
clearly identified in the reference. An express 
statement that the specified matter is incorpo- 
rated bv reference shall be made at the particular 
place in the application where the information is 
required. Matter shall not be incorporated bv 
reference in any case where such incorporation 
would render the statement incomplete, unclear, 
or confusing. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0829 PRESENTATION OF INFORMATION 

(a) The information required in a proxy state- 
ment or offering circular need not follow the or- tained in the report, a reference shall be made in 
der of the items or other requirements in the the list to the report containing such consent, 
appropriate form. Such information shall not, 

however, be set forth in any fashion which ob- Statutory Authority G.S. 54C-33; 54C-53. 
scures any of the required information or am 
information necessary to keep the required in- 
formation from being incomplete or misleading. 
Where an item requires information to be given 
in tabular form, it shafJ be given in substantially 
the tabular form specified in the item. 

(b) All information contained in a plan of 
conversion, proxy statement, or offering circular 
shall be set forth under appropriate captions or 
headings reasonable indicative of the principal 
subject matters set forth thereunder. Except as 
to financial statements and other tabular data, all 



tabular form, the information set forth in a proxy 
statement or offering circular may be expressed 
in condensed or summarized form. 

(e) Financial statements are to be set forth in 
comparative form and shah* include the notes 
thereto and the accountant's certificate or certif- 
icates. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0830 CONSENTS OF EXPERTS 

(a) If any accountant, attorney, investment 
hanker, appraiser, or other persons whose pro- 
fessions give authority to a statement made in 
any application under this Subchapter is named 
as having prepared, received, passed upon, or 
certified any part thereof, or any report or valu- 
ation for use in connection therewith, the written 
consent of such person shall be filed with the 
apphcation. If any portion of a report of an ex- 
pert is quoted or summarized as such in any filing 
under this Subchapter, the written consent of the 
expert shall expressly state that the expert con- 
sents to such quotation or summarization. 

(b) /Ml written consents filed pursuant to this 
Rule shall be dated and signed manually. A list 
of such consents shall be filed with the applica- 
tion. Where the consent of the expert is con- 



information set forth in any form under this 
Subchapter shall be divided into reasonably short 
paragraphs or sections. 

(c) Every proxy statement and offering circular 
shall include in the forepart a reasonably detailed 
table of contents showing the subject matter of 
its various sections or subdivisions and the page 
number on which each such section or subdivi- 
sion begins. 

(d) All information required to be included in 
a proxy statement or offering circular shall be 
clearly understandable without the necessity of 
referring to the particular form or to the regu- 
lations under this Subchapter. Except as to fi^ 
nancial statements and information required in 



.0831 CONSENTS OF PERSONS ABOUT TO 
BECOME DIRECTORS 

If any person who has not signed an application 
is named in the proxy statement or offering cir- 
cular as a potential director, the written consent 
of such person shall be filed with the appropriate 
form. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0832 AMENDMENTS 

/Ml amendments to any application under this 
Subchapter shall be filed under cover of an ap- 
propriate facing sheet, shall be numbered con- 
secutively in the order in which they are filed, and 
shall conform to all pertinent regulations appli- 
cable to the type of application which they 
amend. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0833 POST-CONVERSION REPORTS 

The applicant shall file such post-conversion 
reports concerning its conversion as the adminis- 
trator may require. 



6:15 NORTH CAROLINA REGISTER November I, 1 99 1 



1033 



PROPOSED RULES 



Statutory Authority G.S. 54C-33; 54C-53. 

SECTION .0900 - ACQUISITIONS OF 
SECURITIES OF CONVERTED ASSOCIATIONS 

.0908 DEFINITIONS 

(a) For the purpose of this Section, the term 
"offer" includes every otfer to buy or acquire, 
solicitation of an offer to sell, tender offer for, or 



request or invitation for tenders of, a security or 
interest in a security for value. 

(b) lor the purpose of this Section, the term 
"person" means an individual, a group acting in 
concert, a corporation, a partnership, an associ- 
ation, a joint stock company, a trust, an 
unincorporated organization or similar company. 

(c) Without limitation on the generality of its 
meaning, the term "security" includes 
nontransferable subscription rights issued pursu- 
ant to a plan of conversion. 

(d) For purposes of this Section, the term "ac- 
quire" includes every type of acquisition, whether 
affected by purchase, exchange, operation of law, 
or otherwise. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0909 PROHIBITED TRANSFERS 

Prior to completion of a conversion, no person 
shall transfer or enter into any agreement or 
understanding to transfer the legal or beneficial 
ownership of conversion subscription rights or 
the underlying securities to the account of an- 
other. 



Statutory Authority G.S. 54C-33; 54C-53. 

.0910 PROHIBITION OF OFFERS AND 
CERTAIN ACQUISITIONS 

Prior to completion of a conversion, no person 
shall make any offer, or any announcement of an 
offer, for any security of the converting savings 
bank issued in connection with the conversion 
nor shall any person knowingly acquire securities 
o^ the converted savings bank issued in con- 
nection with the conversion in excess of the 
maximum purchase limitations established in t he- 
approved plan of conversion. 

Statutory Authority G.S. 54C-33; 54C-53. 

.0911 EXCEPTIONS 

(a) Rules .0909 and .0910 of this Section shall 
not apply to a transfer, agreement, or under- 
standing to transfer, offer, or announcement of 
an otfer or intent to make an offer which: 



(2) has the prior written approval of the ad- 
ministrator. 
(b) Rule .0910 of this Section shall not apply 
to any offer with a view toward public resale 
made exclusively to the savings bank or its 
underwriters or selling group acting on the 
savings bank's behalf. 



— Statutory Authority G.S. 54C-33; 54C-53. 



( 1 ) pertains only to securities to be purchased 
pursuant to Paragraph (6) of Rule .03 1 1 
and Paragraphs (ft) and Qjj of Rule .0312 
of this Subchapter; and 



.0912 CRITERIA FOR DENIAL 

The administer shall not approve an application 
involving an offer for, or an announcement 
thereof, or an acquisition of any security of a 
converted savings bank submitted under 4 
NCAC 16A .0105(d) if it finds that such offer 
frustrates the purpose of the provisions of this 
Subchapter, is manipulative or deceptive, sub- 
verts the fairness of the conversion, is likely to 
result in iniurv to the savings bank, or is other- 
wise violative of law or regulation. 

Statutory Authority G.S. 54C-33; 54C-53. 

SECTION .1200 - CONVERSION: MERGERS: 
ACQUISITIONS 

.1203 CONVERSION IN CONNECTION WITH 
ACQUISITION 

A savings bank may convert to the stock form 
as part of a transaction whereby an existing 
holding company acquires all its stock. The eli- 
gible account holders, supplemental eligible ac- 
count holders, and voting members of the 
converting savings bank shall receive, without 
payment, the same nontransferable rights to 
purchase the capital stock of the existing holding 
company, as they would have to purchase capital 
stock of the converting savings bank in a stand- 
ard conversion under the provisions of this Sub- 
chapter. Unless clearly inapplicable, all of the 
requirements of this Subchapter shall apply to a 
conversion under this Rule. 

Statutory Authority G.S. 54C-33; 54C-53; 
54C-195. 

.1204 CONVERSION IN CONNECTION WITH 
MERCER 

A savings bank may convert to the stock form 
by merging with an existing stock depository in- 
stitution as part of a transaction in which the 
equity securities of the existing stock depository 
institution or its holding company are issued. 
The eligible account holders, supplemental eligi- 
ble account holders, and voting members of the 
converting savings bank shall receive, without 
payment, the same nontransferable rights to 
purchase the capital stock of the existing stock 
depository institution, or its holding company. 



1034 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



as they would have to purchase capital stock of 
the converting savings bank in a standard con- 
version under the provisions of this Subchapter. 
Unless clearly inapplicable, all of the require- 
ments of this Subchapter shall apply to a con- 
version under this Rule. 

Statutory Authority G.S. 54C-33; 54C-53; 
54C-195. 

TITLE 10 - DEPARTMENT OF HUMAN 
RESOURCES 



lvotice is hereby given in accordance with G.S. 
I50B-21.2 that the Division of Facility Services, 
Medical Care Commission intends to adopt 
rule(s) cited as 10 NCAC 3W .0101, .0201. 

1 he proposed effective date of this action is 
March 1, 1992. 

1 he public hearing will be conducted at 9:30 
a.m. on December 6, 1991 at the Council Building, 
Room 201, 701 Barbour Drive, Raleigh, NC 
27603. (Dorothea Dix Campus) 

J\eason for Proposed Action: To establish ac- 
creditation standards for facilities that provide 
mammogram and pap smear screening pursuant 
to House Bill 347. 

Comment Procedures: Written comments 
should be submitted to Jackie Sheppard, 701 
Barbour Drive, Raleigh, North Carolina 27603 by 
December 5, 1991. Oral comments may be given 
at the hearing. 

tLditor's Note: These Rules have been filed as 
temporary rules effective October 11, 1991 for a 
period of 141 days to expire on February 29, 1992. 



(b) To be state certified, all laboratories shall 
be licensed under the federal Clinical Laboratory 
Improvement Act as amended or certified by_ the 
Health Care Financing Administration for Med- 
icare or Medicaid for the specialty of cytology. 

(c) To be state certified, laboratories shall per- 
form Pap smear examinations only on specimens 
submitted by a health care provider whose scope 
of practice includes the function of taking 
papsmears. 

(d) An application for state certification shall 
be submitted to the Division of Facility Services 
listing the name and location of the laboratory 
requesting certification, the name of the labora- 
tory director and evidence that the laboratory 
meets the requirements listed in Paragraphs (b) 
and (c) of this Rule. Laboratories will be noti- 
fied in writing within 45 days of the receipt of the 
application that they have been certified or, if 
certification has been denied, of the reasons for 
denial. 

(e) State certification must be renewed when 
licensing or certification renewal is required by 
the program that established state certification 

tv pursuant to Paragraph (b) of this Rule. 



(f) If a laboratory's license or certification for 
one of these programs is suspended or revoked, 
the laboratory' director shall immediately notify 
the Division of Facility Services and the labora- 
tory's state certification under this Rule shall be 
revoked. The laboratory may apply for recertif- 
ication when it can provide evidence that it meets 
the requirements listed in Paragraphs (a) - (e) of 
this Rule. 

(g) Appeals of the Division's decisions regard- 
ing state certification shall be in accordance with 
the Administrative Procedures Act, G.S. 150B. 

Statutory Authority G.S. 143B-165. 

SECTION .0200 - MAMMOGRAPHY 
CERTIFICATION 



CHAPTER 3 



DIVISION OF FACILITY 
SERVICES 



.0201 



SUBCHAPTER 3\V - MAMMOGRAM AND PAP 
SMEAR CERTIFICATION 

SECTION .0100 - PAP SMEAR CERTIFICATION 

.0101 STATE CERTIFICATION FOR 

LABORATORIES CONDUCTING PAP 
SMEARS 

(a) All laboratories evaluating Pap smears for 
which reimbursement will be requested from 
third party intermediaries as addressed in 
N.C.G.S. 58-51-57 shall be state certified by the 
Division of Facility Services, Department of Hu- 
man Resources, in accordance with this Rule. 



STATE CERTIFICATION OF 
SCREENING MAMMOGRAPHY 
SERVICES 



All facilities 



performing 



12 



(a) 
mammograms for which reimbursement will be 
requested from third party intermediaries as ad- 
dressed in N.C.G.S. 58-51-57 shall be state certi- 
fied by the Division of Facility Services, 
Department of Human Resources in accordance 
with this Rule. 

(b) To be state certified, all equipment used in 
the performance of screening mammography 
shall be dedicated to such use by manufacturer's 
design. Each piece of mammography X-ray 
equipment, whether located in a fixed or mobile 
facility, shall be maintained in a sale operating 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1035 



PROPOSED RULES 



condition and shall be registered and used in ac- 
cordance with the Rules m 15A NCAC 1 1. 

(c) To be state certified, all facilities shall be 
certified by the Health Care Financing Adminis- 



tration for Medicare or Medicaid or shall be ac- 



ing information regarding the accessibility 
of mobile units in the area; and 
(6) a plan for meeting standards necessary for 
certification, including the time required 
to meet standards. 



credited by the American College of Radiology (i) Appeals of the Division's decisions regarding 



state certification shall be in accordance with the 
Administrative Procedures Act, G.S. 150B. 



lor the performance of mammography screening. 

(d) An application for state certification shall 

he submitted to the Division of facility Services 

listing the name and location of the facility re- Statutory Authority G.S. I43B-165. 
questing certification, the name of the owner, and 
evidence that the facility meets the requirements 
listed in Paragraphs (b) and (c) of this Rule. 
facilities shall be notified in writing within 45 
days of the receipt of the application that they 
have been certified or, if certification has been 
denied, of the reasons for denial. 



****************** 



(e) State certification must be renewed when 
certification or accreditation renewal is required 
by the program that established state certification 
eligibility pursuant to Paragraph (c) of this Rule. 

( f ) 1 1 a facility's certification or accreditation for 
one of these programs is suspended or revoked, 
the facility operator shall immediately notify the 
Division of facility Services and the facility's 
state certification under this Rule shall be re- 
voked. I "lie facility may apply tor reccrtification 
when \\_ can provide evidence that it_ meets the 
requirements listed in Paragraphs (a) - (c| of this 
Rule. 

(g) The North Carolina Medical Care Com- 
mission delegates the authority to grant waivers 
of this Rule to the Division of facility Services. 

1 he Commission, however, shall review all 
waivers granted at hs next regularly scheduled 
meeting and shall make any revisions to waivers 
deemed necessary at that time. 



(h) In order to be granted a waiver of this Rule, 
a facility shall make a request for a waiver in 
writing to the Division of facility Services pro- 
viding the following: 

( 1 ) justification that the rule should not be 
applied as written, because strict applica- 
tion would cause undue hardship: 

(2) justification that adequate standards as- 
suring earlv detection oi_ breast cancer and 
affording protection of health and safety 
exist and will be met in lieu of the exact 
requirements; 

(3) justification that the purpose of this Rule 
is met through equivalent standards af- 
fording equivalent protection of health 
and safety; 

(4) information on the number of screening 
mammograms performed monthly for the 
previous six months: 

(5) inhumation proving that there is no state 
certified facility nearby bv identifying the 
nearest state certified facility and provid- 



iV otice is hereby given in accordance with G.S. 
150B-21.2 that the Department of Human 
Resources/ Division of Medical Assistance intends 
to amend rule(s) cited as 10 NCAC 26 H .0102. 

1 he proposed effective date of this action is April 
I, 1992. 

1 he public hearing will be conducted at 1:30 
p.m. on January 17. 1992 at the North Carolina 
Division of Medical Assistance, 1985 Umstead 
Drive, Room 132, Raleigh, N.C. 27603. 

I\eason for Proposed Action: The North 
Carolina General Assembly reduced the Medicaid 
budget in the Appropriations Act (Section 95 of 
Chapter 689 of the 1991 Session Laws). 

y^ommenl Procedures: Written comments con- 
cerning this amendment must be submitted by 
January 17, 1992, to: Division of Medical As- 
sistance, 1985 Umstead Drive, Raleigh, North 
Carolina 27603, ATTN.: Bill Hottel, A PA Co- 
ordinator. Oral comments may be presented at 
the hearing. In addition, a fiscal impact statement 
is available upon written request from the same 
address. 

LL di tor's Note: This Rule has been fded as a 
temporary rule effective October 1 , 1991 for a pe- 
riod of 180 days to expire on March 31, 1992. 

CHARIER 26 - MEDICAL ASSISTANCE 

SUBCHAPTER 26H - REIMBURSEMENT PLANS 

SECTION .0100 - REIMBURSEMENT FOR 
NURSING FACILITY SERVICES 

.0102 RATE SETTING METHODS 

(a) A rate for skilled nursing care and a rate for 
intermediate nursing care is determined annually 
for each facility to be effective for dates of service 
for a twelve month period beginning each Octo- 
ber 1. Each patient will be classified in one of 



1036 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



the two categories depending on the services 
needed. Rates are derived from either desk or 
field audited cost reports for a base year period 
to be selected by the state. Cost reports are filed 
and audited under provisions set forth in Rule 
.0104 of this Section. The criteria for determin- 
ing the classification of each patient are presented 
in Appendix 1 of Attachment 3.1 -A of the state 
plan. The minimum requirements of the 1987 
OBRA are met by these provisions, 
(b) Each prospective rate consists of two com- 
ponents: a direct patient care rate and an indirect 
rate - computed and applied as follows: 

(1) The direct rate is based on the Medicaid 
cost per day incurred in the following cost 
centers: 

(A) Nursing, 

(B) Dietary or Food Service, 

(C) Laundry and Linen, 

(D) Housekeeping, 

(E) Patient Activities, 

(F) Social Services, 

(G) Ancillary Services (includes several cost 
centers). 

(2) To compute each facility's direct rate for 
skilled care and intermediate care, the di- 
rect base year cost per day is increased by 
adjustment factors for price changes as set 
forth in Rule .0102(c). 

(A) A facility's direct rates cannot exceed 
the maximum rates set for skilled nursing 
or intermediate nursing care. However, 
the Division of Medical Assistance may 
negotiate direct rates that exceed the 
maximum rate for ventilator dependent 
patients. Payment of such special direct 
rates shall be made only after specific prior 
approval of the Division of Medical As- 
sistance. 

(B) A standard per diem amount will be 
added to each facility's direct rate, includ- 
ing facilities that are limited to the maxi- 
mum rates, for the projected statewide 
average per diem costs of the salaries paid 
to replacement nurse aides for those aides 
in training and testing status and other 
costs deemed by HCFA to be facility 
costs related to nurse aide training and 
testing. The standard amount is based on 
the product of multiplying the average 
hourly wage, benefits, and payroll taxes 
of replacement nurse aides by the number 
of statewide hours required for training 
and testing of all aides divided by the 
projected total patient days. 

(3) If a facility did not report any costs for 
either skilled or intermediate nursing care 
in the base year, the state average direct 
rate will be assigned as determined in Rule 



.0102(d) of this Section for the new type 
of care. 

(4) The direct maximum rates are developed 
by ranking base-year per diem costs from 
the lowest to the highest in two separate 
arrays, one for skilled care and one for 
intermediate care. The per diem cost at 
the 80th percentile in each array is selected 
as the base for the maximum rate. The 
base cost in each array is adjusted for price 
changes as set forth in Rule .0102(c) of 
this Section to determine the maximum 
statewide direct rates for skilled care and 
intermediate care. 

(5) Effective October 1, 1990, the direct rates 
will be adjusted as follows: 

(A) A standard per diem amount will be 
added to each facility's skilled and inter- 
mediate rate to account for the combined 
expected average additional costs for the 
continuing education of nurses' aides; the 
residents' assessments, plans of care, and 
charting of nursing hours for each patient; 
personal laundry and hygiene items; and 
other non-nursing staffing requirements. 
The standard amount is equal to the sum 
of: 

(i) the state average annual salary, bene- 
fits, and payroll taxes for one registered 
nurse position multiplied by the num- 
ber of faculties in the state and divided 
by the state total of patient days; 

(ii) the total costs of personal laundry and 
hygiene items divided by the total pa- 
tient days as determined from the FY 
1989 cost reports of a sample of nursing 
facilities multiplied by the annual ad- 
justment factor described in Rule 
.0102(c)(4)(B) of this Section; and 

(iii) the state average additional pharmacy 
consultant costs divided by 365 days 
and then divided by the average number 
of beds per facility. 

(B) A standard amount will be added to the 
intermediate rate of facilities that were 
certified only for intermediate care prior 
to October 1, 1990. This amount will be 
added to account for the additional cost 
of providing eight hours of RN coverage 
and 24 hours of licensed nursing coverage. 
The standard amount is equal to the state 
average hourly wage, benefits and payroll 
taxes for a registered nurse multiplied by 
the 16 additional hours of required li- 
censed nursing staff divided by the state 
average number of beds per nursing facil- 
ity. A lower amount will be added to a 
facility only if it can be determined that 
the facility's intermediate rate prior to 



6:75 NORTH CAROLINA REGISTER November /. 1991 



1037 



PROPOSED RULES 



October 1, 1990 already includes licensed 
nursing coverage above eight hours per 
day. The add-on amount in such cases 
would be equal to the exact additional 
amount required to meet the licensed 
nursing requirements. 
(C) The standard amounts in Subpara- 
graphs (2)(B), (5)(A), and (5)(B) of this 
Rule, will be retained in the rates of sub- 
sequent years until the year that the rates 
are derived from the actual cost incurred 
in the cost reporting year ending in 1991 
which will reflect each facility's actual cost 
of complying with all OBRA '87 require- 
ments. 

(6) Upon completion of any cost reporting 
year any funds received by a facility from 
the direct patient care rates which have 
not been spent on direct patient care costs 
as defined herein are repaid to the State. 
This will be applied by comparing a facil- 
ity's total Medicaid direct costs with the 
combined direct rate payments received 
for skilled and intermediate care. Costs 
in excess of a facility's total prospective 
rate payments are not reimburseable. 

(7) The indirect rate is intended to cover the 
following costs of an efficiently and eco- 
nomically operated facility: 

(A) Administrative and General, 

(B) Operation of Plant and Maintenance, 

(C) Property Ownership and Use, 

(D) Mortgage Interest. 

(8) Effective for dates of service beginning 
October 1, 1984 and ending September 30, 
1985 the indirect rates are fourteen dollars 
and sixty cents ($14.60) for each SNF day 
of care and thirteen dollars and fifty cents 
($13.50) for each ICF day of care. These 
rates represent the first step in a two step 
transition process from the different SNF 
and ICF indirect rates paid in 1983-84 and 
the nearly equal indirect rates that will be 
paid in subsequent years under this plan 
as provided in this Rule. 

(9) Effective for dates of service beginning 
October 1, 1985 and annually thereafter 
per diem indirect rates will be computed 
as follows: 

(A) The average indirect payment to all fa- 
cilities m the fiscal year ending September 
30. 1983 (which is thirteen dollars and two 
cents ($13.02)] will be the base rate. 

(B) The base rate will be adjusted for esti- 
mated price level changes from fiscal year 
1983 through the year in which the rates 
will apply in accordance with the proce- 
dure set forth in Rule .0102(c) of this 



Section to establish the ICF per diem in- 
direct rate. 
(C) The ICF per diem indirect rate shall be 
multiplied by a factor of 1 .02 to establish 
the SNF per diem indirect rate. This ad- 
justment is made to recognize the addi- 
tional administrative expense incurred in 
the provision of SNF patient care. 

(10) Effective for dates of service beginning 
October 1, 1989, a standard per diem 
amount will be added to provide for the 
additional administrative costs of prepar- 
ing for and complying with all nursing 
home reform requirements. The standard 
amount is based on the average annual 
salary, benefits and payroll taxes of one 
clerical position multiplied by the number 
of facilities in the state divided by the state 
total of patient days. 

(11) Effective for dates of service beginning 
October 1, 1990, the indirect rate will be 
standard for skilled and intermediate care 
for all facilities and will be determined by 
applying the 1990-91 indirect cost adjust- 
ment factors in Rule .0102(c) of this Sec- 
tion to the indirect rate paid for SNF 
during the year beginning October 1, 
1989. Thereafter the indirect rate will be 
adjusted annually by the indirect cost ad- 
justment factors. 

(c) Adjustment factors for changes in the price 
level. The rate bases established in Rule 
.0102(b), are adjusted annually to reflect increases 
or decreases in prices that are expected to occur 
from the base year to the year in which the rate 
applies. The price level adjustment factors are 
computed using aggregate base year costs in the 
following manner: 

( 1 ) Costs will be separated into direct and in- 
direct cost categories. 

(2) Costs in each category will be accumulated 
into the following groups: 

(A) labor, 

(B) other, 

(C) fixed. 

(3) The relative weight of each cost group is 
calculated to the second decimal point by 
dividing the total costs of each group (la- 
bor, other, and fixed) by the total costs for 
each category (direct and indirect). 

(4) Price adjustment factors for each cost 
group will be established as follows: 

(A) Labor. The expected annual percent- 
age change in direct labor costs as deter- 
mined from a survey of nursing facilities 
to determine the average hourly wages for 
RNs, LPNs, and aides paid in the current 
year and projected for the rate year. The 
percentage change for indirect labor costs 



1038 



6:15 NORTH CAROLINA REGISTER November 7, 1991 



PROPOSED RULES 



is based on the projected average hourly 
wage of N.C. service workers. 

(B) Other. The expected annual change in 
the implicit price deflator for the Gross 
National Product as provided by the 
North Carolina Office of State Budget and 
Management. 

(C) Fixed. No adjustment will be made for 
this category, thus making the factor zero. 

(D) The weights computed in (c)(3) of this 
Rule shall be multiplied times the per- 
centage change computed in (c)(4)(A), (B) 
and (C) of this Rule. These products 
shall be added separately for the direct and 
indirect categories. 

(E) The sum computed for each category 
in (c)(4)(D) of this Rule shall be the price 
level adjustment factor for that category 
of rates (direct or indirect) for the coming 
fiscal year. 

(F) However, for the rate period beginning 
October l± 1991 through September 30, 
1992 the forecast of the N.C. Service 
Wages percent applied to the 1991-92 In- 
patient Hospital and Intermediate Care 
Facility for the Mentally Retarded rates is 
applied to the Labor component weight 
computed in (c)(4)(A) of this Rule. 

(G) For the rate period beginning October 
i, 1991 through September 30, 1992 the 
direct adjustment factor determined under 
(c)(4) of this Rule will be applied to the 
direct rate adjustments determined under 
(b)(2), (b)(5)(A) and (b)(5)(B) of this 
Rule. 

(d) The skilled and intermediate direct patient 
care rates for new facilities are established at the 
lower of the projected costs in the provider's 
Certificate of Need application inflated to the 
current rate period or the average of industry base 
year costs and adjusted for price changes as set 
forth in Rule .0102(c) of this Section. A new 
facility receives the indirect rate in effect at the 
time the facility is enrolled in the Medicaid pro- 
gram. In the event of a change of ownership, the 
new owner receives the same rate of payment 
assigned to the previous owner. 

(e) Each out-of-state provider is reimbursed at 
the lower of the appropriate North Carolina 
maximum rate or the provider's payment rate as 
established by the State in which the provider is 
located. For patients with special needs who 
must be placed in specialized out-of-state facili- 
ties, a payment rate that exceeds the North 
Carolina maximum rate may be negotiated. 

(f) Rates: 

(1) A single all-inclusive prospective per diem 
rate combining both the direct and indi- 
rect cost components can be negotiated 



for nursing facilities that specialize in pro- 
viding intensive services for head-injured 
or ventilator-dependent patients. The rate 
may exceed the maximum rate applicable 
to other Nursing Facility services. For 
head-injury services, a facility must spe- 
cialize to the extent of staffing at least 50 
percent of its Nursing Facility licensed 
beds for head-injury services. The facility 
must also be accredited by the Commis- 
sion for the Accreditation of Rehabili- 
tation Faculties (CARF). For ventilator 
services, the only facilities that are eligible 
for a combined single rate are small 
freestanding facilities with less than 21 
Nursing Facility beds and that serve only 
patients requiring ventilator services. 
Ventilator services provided in larger fa- 
cilities are reimbursed at higher direct rates 
as described in Rule .0102(b)(2)(A) of this 
Section. 

(2) A facility's initial rate is negotiated based 
on budget projections of revenues, allow- 
able costs, patient days, staffing and 
wages. A complete description of the fa- 
cility's medical program must also be 
provided. Rates in subsequent years are 
determined by applying the average an- 
nual skilled nursing care adjustment fac- 
tors to the rate in the previous year, unless 
either the provider or the State requests a 
renegotiation of the rate. 

(3) Cost reports for these services must be 
filed in accordance with the rules in .0104 
of this Section, but there will be no cost 
settlements for any differences between 
costs and payments. Since it is appropri- 
ate to include all financial considerations 
in the negotiation of a rate, a provider will 
not be eligible to receive separate pay- 
ments for return on equity as defined in 
Rule .0105 of this Section. 

Authority G.S. 108A-25(b); 108A-54; 10SA-55; 
S. L. 1985, c. 479, s. 86; 42 C.F.R. 447, Subpart 
C; S. L. 1991, c. 689, s. 95. 

****************** 



i V otice is hereby given in accordance with G.S. 
1 SOB- 21 .2 that the Division of Social Services in- 
tends to amend rule(s) cited as 10 NCAC 24 A 
.0606; 29C .0003; 41 P .0006 - .0008; 42E .0903, 
.0905 - .0906, .1102, .1105 - .1108, .1207, .1406; 
42S .0401; 42Z .0604, .0701, .0802 - .0803; and 
adopt rule(s) cited as 10 NCAC 42Z .0901 - 
.0909. 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1039 



PROPOSED RULES 



1 he proposed effective date of this action is 
March 1, 1992. 

1 he public hearing will be conducted at 10:00 
a.m. on December 4, 1991 at the Disability De- 
termination Bldg., 322 Chapanoke Rd., Room 1 , 
Raleigh, N.C. 

l\eason for Proposed Action: 10 NCAC 24 A 
.0606 - To save money and meet the needs of cli- 
ents. 10 SCAC 29C .0003 - Results from federal 
block grant funds being reduced. 10 NCAC 41 P 
.0006 - .0008 - These rules are the result of a re- 
view of adoptions rules by the Adoptions Work 
Group as requested by the Social Services Com- 
mission. 10 NCAC 42E .0903. .0905 - .0906, 
.1102. .1105 - .1108, .1207 .1406; 42S .0401; 42Z 
.0604, .0701. .0802 - .0803 and .0901 ■ .0909 - To 
update rules to reflect current practices in adult 
day health care settings and to more effectively 
meet the needs of the participants. 



Cc 



■ omment Procedures: Comments may be pre- 
sented in writing anytime before or at the public 
hearing or orally at the hearing. Time limits for 
oral remarks may be imposed by the Commission 
Chairman. Any person may request copies of this 
Rule by calling or writing to Donna Creech, Divi- 
sion of Social Services, 325 N. Salisbury St., 
Raleigh, NC 27603, (919) 733-3055. 

CHAPTER 24 - SOCIAL SERVICES: GENERAL 

SUBCHAPTER 24A - GENERAL 

SECTION .0600 - HEARING POLICY 

.0606 APPEAL DECISION 

(a) The hearing officer shall make a tentative 
decision which shall be seto to the appellant by 
certified mail, served upon the county depart- 
ment and the appellant hv mail. Decisions re- 
versing the county department's action shall be 
sent bv certified mail to the county department 
while decisions affirming the county department's 
actions will be sent bv certified mail to the 
appellant. 

(b) The county and the appellant may present 
oral and written argument, for and against the 
decision. Written argument may be submitted 
to or contact made with the Chief Hearing Offi- 
cer to request a hearing for oral argument. 

(c) If the Chief I leanng Officer is not contacted 
within 10 calendar days of the date of the notice 
of the tentative decision, the tentative decision 
shall become final. 



(d) If the party that requested oral argument 
fails to appear at the hearing for oral argument, 
the tentative decision becomes final. 

(e) A decision upholding the appellant shall be 
put into effect within two weeks after receipt of 
the final decision. 

Statutory Authority G.S. 108A-79; J43B-153. 

CHAPTER 29 - INCOME MAINTENANCE: 
GENERAL 

SUBCHAPTER 29C - CRISIS INTERVENTION 
PROGRAM 

.0003 BENEFIT LEVELS 

The maximum payment to a household is two 
hundred dollars ($200.00) pe* application Bet to 
exceed tow hundred dollars ($100.00) in a state 
fiscal year. Payments may vary based upon the 
severity of the crisis and the services needed. 



Statutory Authority G.S. 
150B-13. 



108A-25; 143B-153; 



CHAPTER 41 - CHILDREN'S SERVICES 

SUBCHAPTER 41 P - CHILD-PLACING 
AGENCIES: ADOPTION 

.0006 ADOPTIVE HOME RECRUITMENT 

The agency shall have a written plan for on- 
going recruitment of adoptive homes for the 
children it places or plans to place for adoption. 
The plan must include resources to be used, 
time-related goals for applicant recruitment, and 
any limitations or restrictions that may be inher- 
ent to its program. The plan must indicate des- 
ignated staff and funding sources for 
implementation of the plan. Agencies ■" ■ hall havo 
» pia» which actively recruits hom e s (4 toe same 
taee »f ethnic cat e gory a* that- ef toe children it 
servos, b«t agencies shall Het be limited to mak 
tog adoptive placement &{ such children only 
with p e rsons e4 the sam e raee s+ ethnic category. 
A child's race and ethnic background must be 
considered in determining the most suitable 
adoptive placement, but the agency shall not 
limit the placement of a child for adoption only 
to persons of the same race or ethnic category. 

Statutory Authority G.S. 13 ID- 10.5; I43B-153. 

.0007 ADOPTIVE HOME APPLICATION 

The agency shall provide an application form 
for prospective adoptive parents and shall deter- 
mine in response to the completed application 
whether, within the scope of the agency's pro- 
gram, it is appropriate to conduct an adoptive 
study with the applicants. While the age of ap- 



1040 



6:15 SORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



plicants is among the factors that should be con- 
sidered in determining whether the agency should 
conduct an adoptive study with the applicants, 
there shall be no fixed chronological age at which 
applicants should be automatically rejected for 
study. 

Statutory Authority G.S. I31D-10.5; 143B-153. 

.0008 ADOPTIVE STUDY 

(a) The agency shall conduct an adoptive study 
with its applicants. The study process must in- 
clude at least one office visit with the adoptive 
applicants, one home visit, and separate face-to- 
face interviews with each member of the house- 
hold above six years of age. The study process 
must be a joint effort of the adoption agency and 
the applicants to determine the kind of child the 
applicants can best parent. Any study that was 
completed one year or more before placement of 
a child occurs must be updated to include current 
information about the family. The updated 
study should focus on applicable items in Para- 
graph (b) of this Rule where change could be 
expected to have occurred. Physical examina- 
tions of family members must be current to 
within 12 months of the updated study. 

(b) The agency shall study the following areas 
and shall record the information in the adoptive 
applicants' record: 

(1) the applicants' motivation for adoption; 

(2) the strengths and weaknesses of each 
member of the household; 

(3) the attitudes and feelings of the family, 
extended family, and significant others in- 
volved with the family toward accepting 
adoptive children, and parenting children 
not born to them; 

(4) the attitudes of the applicants toward the 
biological parents and in regard to the 
reasons the child is in need of adoption; 

(5) the applicants' attitudes toward child be- 
havior and discipline; 

(6) the applicants' plan for discussing 
adoption with the child; 

(7) the emotional stability and maturity of 
applicants; 

(8) the applicants' ability to cope with prob- 
lems, stress, frustrations, crises, and loss; 

(9) the applicants' ability to give and receive 
affection; 

(10) the applicants' child-caring skills and 
willingness to acquire additional skills 
needed for the child's development; 

(11) the applicants' ability to provide for the 
child's physical and emotional needs; 

(12) the applicants' record of criminal con- 
victions; 



(13) the adjustment of birth children or pre- 
viously adopted children, including school 
reports, if applicable; 

(14) report of a physical examination for 
members of the adoptive family living in 
the household within six months of the 
study that verifies no communicable dis- 
ease, specific illness, or disabilities that 
would interfere with the family's abilities 
to parent a child; 

(15) the applicants' ability to provide finan- 
cially for the child or children to be 
adopted with or without agency financial 
assistance through adoption subsidy; 

(16) the applicants' personal character refer- 
ences; 

(17) the applicants' religious orientation, if 
any; 

(18) the location and physical environment 
of the home; 

(19) the plan for child care if parents work; 
and 

(20) recommendations for adoption in regard 
to the number, age, sex, characteristics, 
and special needs of children who could 
be best served by the family. 

(c) The adoptive home study must be prepared 
and typed for review by the agency's adoption 
review committee, and it must become part of 
the applicants' permanent record. 

(d) Narrative dictation during the provisional 
period of licensure must be recorded by agency 
staff providing problem pregnancy services, con- 
ducting adoptive studies, and providing post- 
placement services following each contact with 
the child, biological parents, and adoptive parents 
and this dictation must become part of the per- 
manent record. 

Statutory Authority G.S. 13ID-10.5; I43B-153. 

CHAPTER 42 - INDIVIDUAL AND FAMILY 
SUPPORT 

SUBCHAPTER 42E - ADULT DAY CARE 
STANDARDS FOR CERTIFICATION 

SECTION .0900 - ADMINISTRATION 

.0903 AGREEMENTS 

fa) A stat e ment e£ agreement shall b# dev e l 
q n a 1 1 n T~> t-i 1 1 f ) | I \ \~\i \ \ w oon T fa t\ p o v£* m i n p oo i i y of t aj> 

day- eare program a*4 tbe county department ef 
social services specifying terms ©f service, Fe- 
imbursemont a*4 operation el the day eare pro 
gram. 

fb) When the day care program is located in a 
multiple-use facility (e.g., school, church) there 
must be a written agreement regarding the facili- 
ty's cooperative use. The agreement shall con- 



6:15 NORTH CAROLINA REGISTER November I, 1991 



1041 



PROPOSED RULES 



tain the following as they apply to the adult day 
care program: time of use, maintenance of space, 
use of equipment, security, liability, and insur- 
ance. 

Statutory Authority G.S. 143B-153. 

.0905 PERSONNEL: CENTERS: HOMES 
WITH OPERATOR AND STAFF 

(a) General Requirements 

( 1 ) Staff positions shall be planned and filled 
according to the goals of the program and 
the manpower needed to develop and di- 
rect the activities which meet these goals. 

(2) All staff of the program shall be compe- 
tent, ethical, and qualified for the position 
held. 

(3) There shall be a written job description for 
each position, full-time or part-time. The 
job description shall specify qualifications 
of education, experience, and personal 
traits (including such characteristics as 
ability to relate to people, patience, posi- 
tive mental attitude, ability to listen, sense 
of responsibility to the program, etc.); to 
whom employee is responsible; duties and 
responsibilities; and salary range. 

(4) References, including former employers, 
shall be required in recruitment of staff. 

(5) There shall be an established review proc- 
ess for each employee at least annually 
and following any probationary period. 

(6) Provision shall be made for orientation 
and staff development of new employees 
and volunteers and ongoing development 
and training of all staff. 

(7) At least one substitute staff person shall 
be available to provide direct care in the 
absence of a regular staff person in order 
to maintain the required staff-participant 
ratio. Such substitute staff shall have the 
same qualifications, training, and personal 
credentials as a regular staff person giving 
direct care. Trained volunteers may be 
used instead of paid substitutes. 

(8) Each employee must present medical evi- 
dence that he is free from communicable 
disease prior to beginning work and an- 
nually thereafter. 

(b) Personnel Policies 

(1) Personnel policies and their content are 
the responsibility of each adult day care 
center. Each center is required to state its 
policies in writing. A copy of this state- 
ment of personnel practice shall be given 
to each employee and shall state the cen- 
ter's policy on the following: 

(A) annual leave, 

(B) educational opportunities, 



(C) pay practices, 

(D) employee benefits, 

(E) grievance procedures, 

(F) performance and evaluation procedures, 

(G) criteria for advancement, 
(H) termination procedures, 

(I) hiring and firing responsibility, 
(J) use of any probationary period, 
(K) staff participation in reviews of per- 
sonnel practices, 
(L) maternity leave, 
(M) military leave, 

(N) civil leave (jury duty and court attend- 
ance). 
(2) All policies developed must conform to 
the wage and hour regulation. 

(c) Staffing Pattern. The staffing pattern shall 
be dependent upon the enrollment criteria and 
the particular needs of the participants who are 
to be served. The ratio of paid staff to partic- 
ipants shall be adequate to meet the goals and 
objectives of the program. Whenever paid staff 
are absent, substitutes must be used to maintain 
the staff-participant ratio. The minimum ratios 
shall be as follows: 

(1) Adult Day Care Homes 

One paid staff person for up to six partic- 
ipants; 

(2) Adult Day Care Centers 

One paid staff person for each eight par- 
ticipants. 

(d) Program Director 

( 1 ) The program director shall have the au- 
thority and responsibility for the manage- 
ment of activities and direction of staff to 
insure that activities and services are pro- 
vided appropriately and in accordance 
with established policies. 

(2) The program director shall meet all of the 
minimum qualifications and personal 
traits stated below: 

(A) shall be ef majority age at least 18 years 
of age; 

(B) shall have completed at least two years 
of formal post secondary education from 
an accredited institution of education (in- 
cluding colleges, universities, technical in- 
stitutes, and accredited correspondence 
schools) or shall have a high school edu- 
cation and a minimum of five years expe- 
rience and training in services to elderly 
or handicapped adults; 

(C) shall have at least two years of work 
experience in a human services area, and 
demonstrated ability in supervision and 
administration; 

(D) shall provide a written medical state- 
ment from a physician, nurse practitioner, 
or physician's assistant certifying good 



1042 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



health, including freedom from 
communicable disease prior to employ- 
ment and annually thereafter; 
(E) shall provide at least three current ref- 
erence letters or the names of individuals 
with whom a reference interview can be 
conducted, including at least one former 
employer, if any. The individuals pro- 
viding reference information must be 
knowledgeable of the applicant director's 
background and qualifications. 

(3) In employing a program director, the 
governing body, agency or owner shall 
consider whether or not applicants exhibit 
the following characteristics. Only per- 
sons having these characteristics should 
be considered for the position of program 
director. 

(A) maturity -- good judgment, emotional 
stability, ability to make decisions and set 
goals; 

(B) knowledge and understanding of the 
needs of the aging and disabled; 

(C) ability to design and implement a 
varied, structured program of group and 
individual activities. 

(D) managerial and administrative skills - 
ability to supervise staff and to plan and 
coordinate meaningful staff training. 

(4) The adult day care center shall have a 
full-time program director. 

Statutory Authority G.S. I43B-153. 

.0906 PERSONNEL: DAY CARE HOMES: 

ONLY STAFF PERSON IS OPERATOR 

(a) The operator shall: 

(1) be competent, ethical and qualified to 
carry out the responsibilities of providing 
a day care program; 

(2) have a minimum of a high school educa- 
tion or the equivalent; 

(3) be &£ majority age at least 18 years of age; 

(4) have at least two years of full-time work 
experience and demonstrated ability to 

_ manage all aspects of a day care program; 

(5) provide a written medical statement from 
a physician, nurse practitioner, or a phy- 
sician's assistant certifying good health, 
including freedom from communicable 
disease prior to beginning &e day ewe 
program employment and annually there- 
after; 

(6) have ability to work with people; 

(7) provide references, including former em- 
ployoro. at least three current reference 
letters or the names of individuals with 
whom a reference interview can be con- 



ducted, including at least one former em- 



ployer, if any. The individuals providing 
reference information must be know- 
ledgeable of the applicant operator's 
background and qualifications. 

(b) There shall be a minimum of one staff 
person for two-six participants. 

(c) The day care home shall have substitute or 
relief staff to enable the day care home to remain 
open on days when the operator is not available 
to supervise the program. 

Statutory Authority G.S. 143B-153. 

SECTION .1100 - PROGRAM OPERATION 

.1102 NUTRITION 

(a) A midday meal shall be provided to each 
participant in attendance at the program during 
mealtime. The meal shall provide at least one- 
third of an adult's daily nutritional requirement. 
Meals shall be prepared and served in a sanitary 
manner using safe food handling techniques. 

(b) A nutritious mid-morning and mid- 
afternoon snack shall be offered daily to partic- 
ipants. Snacks shall be planned to keep sugar, 
salt and cholesterol intake to a minimum. 

(c) A therapeutic diet shall be provided, if pre- 
scribed in writing by a physician, for any partic- 
ipant. If therapeutic diets are prepared by 
program staff, such staff shall have training in 
planning and preparing therapeutic diets or shall 
provide documentation of previous training and 
education sufficient to assure ability to prepare 
meals in accordance with a physician's pre- 
scription. 

(d) A licenood registered dietitian or certified 
nutritionist shall give consultation to the staff on 
basic and special nutritional needs and proper 
food handling techniques. 

Statutory Authority G.S. 143B-153. 

.1105 MEDICATIONS 

(a) Medications shall be administered according 
to the participant's established medication 
schedule as defined in Rule . 1108(l)(d)(v) of this 
Section or as authorized bv the responsible 
caregiver. 

(b) (a} Participants may keep and administer 
their own medicines while attending the day care 
program. If a participant is determined to be 
unable to be responsible for his medication, it 
shall be kept for him during the time he is present 
at the program and given to him to take at the 
prescribed time and dosage. Check sheets shall 
be k-ept- te record s«eh action by staff. Doc- 
umentation of whether or not the medications 
are kept by the program shall be included in each 
participant's file. 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1043 



PROPOSED RULES 



(c) A record of all medications given to each 
participant must be kept indicating each dose 
given and -is to include the following: 



Hi 

111 

(5) 



participant's name; 

name, strength, and quantity of the 
medication; 

instructions for giving medication; 
date and time medication is administered; 
and 

name or initials of person giving, the 
medication. If initials are used, a signa- 
ture equivalent to those initials is to be 
entered on this record. 



(d) (&} Medications kept by the program shall 
be in containers in which they were dispensed. 
from ike pharmacy -T The containers shall be 
clearly labeled with the participant's full name, 
the name and strength of the medicine, and 
dosage and instructions for administration. 
Medicines kept by the program shall be kept 
locked in a safe place. 

(e) fe4 The program policy statement shall in- 
clude the policy on medications, specifying that 
participants who are able to keep their medicines 
shall keep them safely and that the program will 
keep medicine of participants who are unable to 
be responsible for their own. 

Statutory- Authority G.S. I43B-153. 

.1 106 HOURS AND DAYS OF OPERATION 

(a) The hours and days of operation shall be 
set to meet the needs of the participants and their 
families. 

(b) Care and services shall be provided 
throughout all hours participants are present at 
the program. 

(c) The program must operate for a minimum 
of six hours each day. 

(d) Day care programs shall provide care and 
activities at least five days per week, except that 
a facility may be closed for designated holidays, 
for hazardous weather conditions, for vacations, 
and for other reasons as agreed by the director 
and the county department of social services. » 
ike annual statement el agreement f*e* .0003(a) 
&£ ihkr Subchapter). Late openings or early clo- 
sures may be scheduled on days when hazardous 
weather conditions exist or when emergency sit- 
uations arise. 

(e) Attendance schedules for individual partic- 
ipants should be designed to accommodate the 
work schedules of participants' caretaker: . . 
caregivers. 

Statutory Authority G.S. 1 43 B- 1 53. 

.1 107 POSTING OF PROGRAM POLICY 
STATEMENT 



The day care program policy statement shall be 
posted in the facility during hours of operation 
and copies shall be available on request [.0901 
(c)(5)(A) (b)(5)(A) or (c)(3)(A) of this 
Subchapter). 

Statutory Authority G.S. 143B-153. 

.1108 RECORDS 

Each adult day care program shall maintain re- 
cords to document the progress of each partic- 
ipant and to document program operation. The 
following records are required: 
(1) Individual Client Records. An individual 
folder for each participant shall be estab- 
lished and maintained, including: 

(a) a signed application recording: 
(i) client's full name; 

(ii) address and telephone number; 

(iii) date of birth, marital status and living 

arrangement of client; 
(iv) time of day client will arrive and time 

of day client will leave the center, on the 

average; 
(v) travel arrangements to and from the 

center for the client; 
(vi) name, address and telephone number 

of at least two family members and or 

friends who are responsible for the client 

and can be contacted in emergencies; 
(vii) name, address and telephone number 

of a licensed medical service provider who 

will see the client on request; 

(b) copies of signed authorizations for the day 
care program to receive and give out con- 
fidential information on the participant 
when necessary to maintain the partic- 
ipant's health and to help the participant 
improve; Such authorization shall include 
the name of the party from whom infor- 
mation is requested and to whom infor- 
mation is given. Such authorization must 
be obtained each time a request for client 
information is made; 

(c) a signed authorization for the client to re- 
ceive emergency medical care from any li- 
censed medical practitioner, if such 
emergency care is needed by the client; 

(d) a medical examination report signed by a 
licensed physician or physician's assistant; 
This report must be completed prior to 
enrollment and updated annually there- 
after. The report shall include informa- 
tion on: 

(i) current diseases and chronic conditions 
and the degree to which these 
diseases conditions require: 
(A) special attention by day care staff. 



1044 



6:15 SO RTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



(B) restriction of normal activities by the 
client; 
(ii) presence and degree of psychiatric 

problems; 
(iii) amount of direct supervision the client 

requires; 
(iv) any limitations on physical activities, 

such as walking, exercises, etc.; 
(v) listing of all medications with dosages 

and times medications are to be adminis- 
tered; 
(vi) most recent date participant was seen 

by doctor; 

(e) the written report of staff discussions, 
conferences, consultation with family or 
other interested parties, evaluation of a 
participant's progress and any other sig- 
nificant information regarding a partic- 
ipant's situation; 

(f) all service plans for the participant; 

(g) a signed authorization if the participant 
or his responsible party will permit pho- 
tographs or slides of the participant to be 
made by the day care program and speci- 
fying the publicity efforts in which such 
photographs will be used. Such authori- 
zation must be obtained prior to taking 
photographs of the participant; 

(h) a statement signed by a family member 
or other responsible person (when appli- 
cable) acknowledging receipt of the pro- 
gram's policy statement and agreeing to 
uphold program policies pertaining to 
their participant. 
(2) Program Records for Day Care Centers. 
Program records shall contain: 

(a) copies of program plans; 

(b) monthly records of expenses and income, 
including fees collected, and fees to be 
collected; 

(c) all bills, receipts and other pertinent in- 
formation which document expenses and 
income, to be kept for a minimum of 
three years; 

(d) a daily record of attendance of participants 
by name; 

(e) accident reports; 

(f) a record of staff absences, annual leave and 

sick leave, including dates and names of 
substitutes; 

(g) reports on emergency and fire drills; 

(h) individual personnel records on all staff 

members including: 
(i) application for employment, 
(ii) job description, 
(iii) medical certification of absence of 

communicable disease, 
(iv) written note or report on any personnel 

action taken with the employee; 



(v) written report of annual employee re- 
view; 
(i) a copy of all written policies, including: 
(i) program policy statement, 
(ii) personnel policies, 
(iii) agreements, 
(iv) plan for emergencies, 
(v) evacuation; 
(j) evaluation reports; 

(k) control file of DSS- 1360s for all partic- 
ipants for whom Social Services Block 
Grant (Title XX) reimbursement is 
claimed. 
(3) Program Records for Day Care Homes. 
Program records shall contain: 

(a) copies of program plans; 

(b) a monthly record of the expenses and in- 
come of the day care program; 

(c) all bills, receipts and other pertinent in- 
formation which document expenses and 
income, to be kept for a minimum of 
three years; 

(d) a daily record of attendance of partic- 
ipants; 

(e) accident reports; 

(f) a copy of all written policies, including: 
(i) program policy statement, 

(ii) personnel policies, 
(iii) agreements, 
(iv) plan for emergencies, 
(v) evacuation plan; 

(g) program evaluation reports; 

(h) reports on emergency and fire drills; 

(i) control file of DSS- 1360s on all partic- 
ipants for whom Social Services Block 
Grant [Title XX) reimbursement is 
claimed. 

Statutory Authority G.S. I43B-I53. 

SECTION .1200 - CERTIFICATION 
PROCEDURE 

.1207 PROCEDURE 

(a) All individuals, groups or organizations 
operating or wishing to operate an adult day care 
program as defined by G.S. 131 D-6 must apply 
for a certificate to the county department of so- 
cial services in the county where the program is 
to be operated. 

(b) A designated social worker will supply 
necessary forms and standards for certification 
and will make a study of the program. 

(c) The following forms and materials make 
up an initial certification package and must be 
submitted through the county department of so- 
cial services to the state Division of Social Ser- 
vices: 

(1) The program policy statement; 



6:15 NORTH CAROLINA REGISTER November 1, 1 99 1 



1045 



PROPOSED RULES 



(2) Organizational diagram; 

(3) Job descriptions; 

(4) Documentation showing planned expend- 
itures and resources available to cany out 
the program of service for a 12 month 
period; 

(5) A floor plan of the facility showing meas- 
urements, restrooms and planned use of 
space; 

(6) Form DSS-1498 (Fire Inspection Report) 
completed and signed by the local fire in- 
spector no more than 30 days prior to 
submission with the certification package; 

(7) Form DSS-1499 (Building Inspection Re- 
port for Day Care Services for Adults) 
completed and signed by the local build- 
ing inspector, or fire inspector or fire 
marshal! if a building inspector is not 
available, no more than 30 days prior to 
submission with the certification package; 

(8) Form DSS-2386 (Sanitation Evaluation 
Report) completed and signed by a local 
sanitarian no more than 30 days prior to 
the submission with the certification 
package; 

(9) Written notice and the effective date, if a 
variance of local zoning ordinances has 
been made in order for property to be 
utilized for an adult day care program; 

(10) A copy of the articles of incorporation, 
bylaws and names and addresses of board 
members, for adult day care programs 
sponsored by a non-profit corporation; 

(11) The name and mailing address of the 
owner if a proprietary program; 

(12) A medical statement for each staff mem- 
ber certifying to freedom from 
communicable disease and to good health 
signed by a licensed physician, physician 
assistant or nurse practitioner no more 
than 30 days prior to submission with the 
certification package; and 

(13) DSS- 1500 (Adult Day Care Certification 
Report). This form must be submitted 
by the county department of social ser- 
vices with a copy to the program. 

(d) The following forms and materials make 
up a certification package for the renewal of a 
certification and must be submitted through the 
county department of social services, no more 
than 60 days prior to the end of the current pe- 
riod of certification, to the state Division of So- 
cial Services: 

(1) Form DSS-1498 (Fire Inspection Report) 
completed and signed by the local tire in- 
spector no more than 30 days prior to 
submission with the certification package; 

(2) Form DSS-1499 (Building Inspection Re- 
port for Day Care Services for Adults) or 



the equivalent completed and signed by 
the local building inspector, or fixe in- 
spector or fire marshall if a building in- 
spector is not available, no more than 30 
days prior to submission with the certif- 
ication package when building modifica- 
tions have been made during the previous 
12 months; 

(3) Form DSS-2386 (Sanitation Evaluation 
Report) completed and signed by a local 
sanitarian no more than 30 days prior to 
submission with the certification package; 

(4) A medical statement for each staff member 
certifying to freedom from communicable 
disease and to good health signed by a li- 
censed physician, physician assistant or 
nurse practitioner no more than M days 
J_2 months prior to submission with the 
certification package; 

(5) An updated copy of the policy statement, 
organizational diagram, job descriptions, 
names and addresses of board members if 
applicable, and a floor plan showing 
measurements, restrooms, and planned 
use of space, if any changes have been 
made since the previous certification 
package was submitted; 

(6) Documentation showing planned expend- 
itures and resources available to carry out 
the program of service for a 12 month 
period; and 

(7) DSS- 1500 (Adult Day Care Certification 
Report). This form must be submitted 
with the certification package by the De- 
partment of Social Services to the Divi- 
sion of Social Services at least 30 days in 
advance of the expiration date of the cer- 
tificate, with a copy to the program. 

(e) If during the study of the program it does 
not appear that all standards can be met, the 
county department will so inform the applicant, 
indicating in writing the reasons, and give the 
applicant an opportunity to withdraw the appli- 
cation. Upon the applicant's request, the appli- 
cation will be completed and submitted to the 
Division of Social Services for consideration. 

(f) Following review of the certification pack- 
age, a pre-certification visit may be made by staff 
of state Division of Social Services. 

(g) The Division of Social Services will 
promptly notify in writing to the applicant and 
the county department of social services of the 
action taken after a review of the certification 
package and visit, if made. 

Statutory Authority G.S. 131D-6; 143B-I53. 

SECTION .1400 - CERTIFICATION 
INFORMATION 



1046 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



.1406 PROCEDURE FOR APPEAL 

(a) When the program is notified by the Divi- 
sion of Social Services of a negative action, the 
program may ask for an informal review by divi- 
sion staff. If the review is not satisfactory, the 
program may request a hearing. 

(b) The program may request a hearing within 
60 days after receipt of written notification from 
the division of a negative action, by written no- 
tice through registered or certified mail to the 
Office of Administrative Hearings, 424 North 
Blount Street, Raleigh, NC 27601. In addition, 
at any time before the hearing, the Division of 
Social Services may rescind the notice of denial 
9f relocation negative action upon being satisfied 
that the reasons for such action have been cor- 
rected. 

(c) Except as provided for in Rule .1404(d) of 
this Subchapter, upon receipt of a request for a 
hearing, the enforcement of the negative action 
shall be suspended pending final agency decision. 

(d) The petition for a hearing shall be tiled with 
the Office of Administrative Hearings in accord- 
ance with G.S. 150B-23 and 26 NCAC 3 .0003. 
In accordance with G.S. 1A-1, Rule 4 (j) 4, the 
petition shall be served on a registered agent for 
service of process for the Department of Human 
Resources. A list of registered agents may be 
obtained from the Office of Legislative and Legal 
Affairs. 

(e) Procedures for the processing of an appeal 
of an adverse certification action and for the final 
decision are specified in G.S. 150B, Article 3 and 
10 NCAC IB .0200. 

Statutory Authority G.S. 131D-6; 143B-I53. 

SUBCHAPTER 42S - DAY CARE SERVICES FOR 
ADULTS 

SECTION .0400 - PAYMENT METHODS FOR 
DAY CARE CENTERS/HOMES 

.0401 GENERAL POLICY 

(a) Day care services for adults may be provided 
directly by staff of county departments of social 
services or under a purchase contract with an- 
other provider. 

(b) The purchase contract shall be developed 
annually between the governing body of the day 
care program and the county department of so- 
cial services specifying the terms of service, re- 
imbursement and operation of the day care 
program. 

Statutory Authority G.S. I43B-153. 

SUBCHAPTER 42Z - ADULT DAY HEALTH 
STANDARDS FOR CERTIFICATION 



SECTION .0600 - ADMINISTRATION 

.0604 STAFF REQUIREMENTS 

(a) Program Director of Adult Day Health 
Centers: 

(1) Adult day health centers with a capacity 
of more than 10 participants must have a 
full-time program director. Adult day 
health centers with a capacity of 10 or 
fewer participants must have a full time 
program director or a program director 
who also serves as the health care coordi- 
nator provided that the individual meets 
all the requirements set forth in (a) and 
(b) of this Rule and if requirements in 
Rule .0603 of this Section related to pro- 
gram capacity are met. 

(2) The program director shall have the au- 
thority and responsibility for the manage- 
ment of activities and direction of staff to 
insure that activities and services are pro- 
vided appropriately and in accordance 
with established policies. 

(3) The program director must meet all of the 
following minimum qualifications and 
personal traits: 

(A) shall be ef majority age at least 1 8 years 
of age; 

(B) shall have completed at least two years 
of formal post secondary education from 
an accredited institution of education (in- 
cluding colleges, universities, technical in- 
stitutes, and accredited correspondence 
schools) or shall have a high school edu- 
cation and a minimum of two years ex- 
perience and training in services to elderly 
or handicapped adults; 

(C) shall have at least one year of work ex- 
perience in a human services area, and 
demonstrated ability in supervision and 
administration; 

(D) shall provide a written medical state- 
ment from a physician, nurse practitioner, 
or physician's assistant »f health depart 
mont certifying good physical health, in- 
cluding freedom from communicable 
disease prior to employment in the day 
health program and annually thereafter; 

(E) shall provide at least three current ref- 
erence letters or the names of individuals 
with whom a reference interview can be 
conducted, including at least one former 
employer, if any. The individuals pro- 
viding reference information must be 
knowledgeable of the applicant director's 
background and qualifications. 

(4) In employing a program director, the 
governing body, agency or owner shall 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1047 



PROPOSED RULES 



consider whether or not applicants exhibit 
the following characteristics. Only per- 
sons having these characteristics shall be 
considered for the position of program 
director: 

(A) ability to design and implement a 
varied, structured program of group and 
individual activities; 

(B) managerial and administrative skills - 
ability to supervise staff and to plan and 
coordinate meaningful staff training. 

(b) Health Care Coordinator of Adult Day 
Health Centers: 

( 1 ) Adult day health centers must have a 
health care coordinator to sup e rvis e coor- 
dinate the delivery of health care services 
and participate in direct care as specified 
in Subparagraph (b)(2) of this Rule. The 
health care coordinator shall be on-site a 
minimum of four hours per day and any 
additional hours necessary to meet the re- 
quirements for the provision of health 
care services as set forth in this Subchap- 
ter. The health care coordinator may as- 
sume responsibility for the position in 
Paragraph (a) of this Rule, if qualified for 
that position and if requirements in Rule 
.0603 of this Section related to program 
capacity are met. 

{ I \ T-* .-i ,- t-1 , -i t-i l i lai I I t * ■ I ■ ' i-i ■t li l .l P ' ' j 'T rA ti , ^ t 1 | r-i-i i t \ . 1 

y"^T^ T^^r^T^r^Ti^TT"*TTiT^^^^ rnTTTTOc ^^^^T ^^T^T ^^^^T 11_1 1 l I I L VI 

t© the following: 

{A} screen vital signs, weight, dental health, 
general nutrition aft©, hygiene ©f- partic 
i pants periodically; 

(-&} monitor medical regimen; 

fG} monitor provision ef personal care; 

(4A} coordinate with other health eaje pro- 
fessionals a«4 family members concerning 
health matt e rs; 

(-h4 educat e other staff members t© omer 
gency proc e dur e s a«4 educate staff a»4 
family members about health concerns 
a«4 conditions ©f- participants; 

(+4 provide minor fost a+4 treatment as 
needed. 

(2) The nursing responsibilities of the health 
care coordinator, consistent with the 
Nursing Practice Act, include but are not 
limited to: 

(A) completing preadmission health assess- 
ment for initial acceptance into program, 
including problem-identification and care 
planning; 

(B) implementing the health care compo- 
nents of the established service plan which 
may include, but is not limited to: 

(i) medication administration: 

(ii) wound care; 

(iii) enteral or parenteral feedings; 



(iv) bowel or bladder training and main- 
tenance programs; 

(v) tracheostomy care and suctioning; 

(vi) delegating appropriate nursing care 
tasks to qualified unlicensed personnel; 

(C) monitoring participant's response to 
medical treatment plan and nursing inter- 
ventions and revising plan of care as nec- 
essary; 

(D) reporting and recording results of the 
nursing assessment, care rendered and 
participant's response to care; 

(F) collaborating with other health care 
professionals and caregivers regarding 
provision of participant's health care; 

(F) educating other staff members to emer- 
gency procedures and providing informa- 
tion to staff and caregivers about health 
concerns and conditions of participants; 
and 

(G) providing first aid treatment as needed. 
(3) The health care coordinator must meet the 

following minimum qualifications: 
fA} the successful completion ©f training 
as a registered nurse ©f as a lic e ns e d prac 
tical nurse when supervision » provided 
©ft site by- a registered nurse during the 
hours spent i» providing health ease ser- 
vic e s. 
(©} licensed t© practice nursing ift North 
Carolina. 

(A) must be either a registered nurse or a 
licensed practical nurse currently licensed 
to practice in North Carolina; 

(B) if the health care coordinator is a IT 
censed practical nurse: 

(1) supervision must be provided bv a 
registered nurse consistent with the 
Nursing Practice Act and related Ad- 
ministrative Rules; and 
(ii) on-site supervision bv the registered 
nurse must occur no less frequently 
than even - two weeks. 
£4} fft employing the health ea*e coordinator, 
the governing body aft©, administrator 
shall consider wh e th e r ©f »©t applicants 
exhibit the following characteristics. Only 
persons having these characteristics shall 
he considered fof the position ©f health 
ea*e coordinator: 
(A) managerial aft© administrative skills - 
ability t© supervise staff aft© t© ©laft a»4 
coordinat e m e aningful staff training; 

(C) (-B} knowledge and understanding of the 
physical and emotional aspects of aging, 
the resultant diseases and infirmities and 
related medications and rehabilitative 
measures; 

(D) be at least 18 years of age; 



1048 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



(E) provide a written medical statement 
from a physician, nurse practitioner, or 
physician's assistant certifying good phys- 
ical health, including freedom from 
communicable disease prior to employ- 
ment and annually thereafter; 

(F) shall provide at least three current ref- 
erence letters or the names of individuals 
with whom a reference interview can be 
conducted, including at least one former 

if any. The individuals pro- 

be 



employer 
viding reference 



information must 



(2) 

(d) 
(1) 



(2) 



knowledgeable of the applicant director's 
background and qualifications. 
(c) Staff Responsible for Personal Care in 
Adult Day Health Centers. All day health center 
staff providing personal care must present evi- 
dence of meeting the following qualifications be- 
fore assuming such responsibilities: 

(1) successful completion of nurse's aide, 
home health aide or equivalent training 
course, or 

a minimum of one year of related experi- 
ence. 
Personnel in Adult Day Health Homes: 
A minimum of one full-time equivalent 
staff person must be designated as having 
responsibility for direct participant care 
for two to five participants. The staff 
person with this responsibility may be the 
operator or other designated paid staff. 
The operator or designated paid staff shall 
meet the requirements for health care co- 
ordinators as set forth in Paragraph (b) of 
this Rule and: 

(A) be competent and qualified to carry out 
the rooponobiliition responsibilities of pro- 
viding a day health program; 

f&) a+ a- minimum hav e succ e ssfully com 
plotod training a* a regiotorod nurso a«4 
be liconood te practice) nursing » North 
Carolina; 

fG} be ef majority age fat- l e ast 4-8 yoars ef 

(B) (-D4 have at least two years of full time 
related work experience and domonstratod 
ability to manage all aspects of a day 
health program; and 

fS4 provide; a written statomont from a 
physician ©f a hoalth department certify 
mg good physical hoalth, including froo 
dom from communicablo dis e as e prior to 
beginning tfee day hoalth program an4 
annually ther e after; 

(C) fp} have ability to work with people. 
{&) provido references, including former 

e mployer. 
(3) The day health home shall have substitute 
or relief staff to enable the day health 



home to remain open on days when the 
operator is not available to supervise the 
program. This substitute or relief staff 
shall meet the minimum qualificationo re- 
quirements for health care coordinators 
as set forth in Paragraph (b) of this Rule. 

Statutory Authority G.S. I31D-6. 

SECTION .0700 - FACILITY REQUIREMENTS 
FOR CENTERS AND HOMES 

.0701 REQUIREMENTS 

(a) General requirements governing facilities, 
construction, equipment and furnishings for 
adult day care as set forth in 10 NCAC 42E .1000 
shall apply to adult day health. 

(b) Additional facility requirements are as fol- 
lows: 

(1) Facility space must be of sufficient di- 
mension and size to allow for required 
program group activities. 

Notwithstanding the space requirements 
of 10 NCAC42E .1001: 

(A) day health centers and homes shall 
provide at least 60 square feet of indoor 
space excluding hallways, offices and 
restrooms for each participant; 

(B) combination programs shall provide at 
least 50 square feet of indoor space ex- 
cluding hallways, offices and restrooms for 
each participant; 

(C) day health programs or combination 
programs which share space with other 
programs or activities in a multi-use facil- 
ity must have a nucleus area separate from 
other activities in the rest of the building, 
(i) The nucleus area must provide at least 

40 square feet of indoor space per par- 
ticipant excluding hallways, offices and 
restrooms, and a minimum of 20 square 
feet per participant must be provided in 
other space in the facility designated for 
use by the day health program. When 
the other space is being used at the 
same time by individuals participating 
in other services provided in the multi- 
use facility, the 20 square feet per par- 
ticipant is in addition to any minimum 
square footage requirement for other 
use of such space. Shared facility space 
outside the nucleus area which may be 
used by the day health program and 
counted in meeting the 20 square feet 
per participant requirement includes 
craft, therapy and other activity areas. 
Dining space may be included if also 
used for activities. Offices, restrooms, 
hallways, kitchens and shared treatment 



6:15 NORTH CAROLINA REGISTER November I, 1991 



1049 



PROPOSED RULES 



rooms may not be counted in meeting 
the 20 square feet per participant re- 
quirement. 

(ii) Participation is open only to persons 
enrolled in the program and to visitors 
on a planned basis. Depending on the 
nature of the other activities in the 
building, it may or may not be appro- 
priate for day health participants to 
share in them on a planned basis. Such 
involvement must be as part of the day 
health program plan and must be 
supervised by a day health staff mem- 
ber. 

(iii) The Department will grant certif- 
ication to programs operating in multi- 
use facilities, even though they are not 
otherwise in compliance with space re- 
quirements, if the integrity of the pro- 
gram and the health, safety, and 
well-being of the participants is deter- 
mined to be at or above the level of the 
requirements of this Subchapter. No 
variance shall be allowed by the de- 
partment to standards adopted by the 
Building Code Council and subject to 
the general supervision and enforce- 
ment of the Commissioner of Insur- 
ance, or to any standard adopted by the 
Health Services Commission. If certif- 
ication is granted despite non- 
compliance with the space requirement, 
such certification may be renewed if the 
Department determines that the health, 
safety and well-being of the participants 
are not being threatened, and if the in- 
tegrity of the program is not being 
compromised. 

(2) Facilities with a capacity of more than 12 
adults, including staff, shall have separate 
restrooms for males and females. Each 
restroom shall contain a minimum of one 
toilet and one lavatory. 

(3) The facility shall include a treatment room 
which is enclosed and private from the 
rest of the facility. The treatment room 
must have a sink or have a door-way 
which connects it to a room containing a 
sink. The room shall contain a treatment 
table, storage cabinet for first aid and 
medical supplies and equipment, table or 
desk and two chairs. The storage cabinet 
shall be kept locked. 

(4) The facility shall have sufficient private 
offices for staff use, including use for con- 
ferences with individual participants and 
their families. Programs must have a 
minimum of one private office with suffi- 
cient equipment and furnishings for ad- 



ministrative purposes and for conferences. 
Programs in multi-use facilities must have 
their own offices readily accessible to 
family members, staff and participants. 
(5) The facility shall have, at a minimum, the 
following medical supplies and equip- 
ment: 

(A) standard first aid supplies adequate to 
meet the needs of participants, 

(B) fever thermometer, 

(C) blood pressure cuff, 

(D) stethoscope, 

(E) medical scales, 

(F) privacy screen, 

(G) emesis basin, 
(H) bed pan, 

(I) urinal, 

(J) wash basin. 

Statutory Authority G.S. 131D-6. 

SECTION .0800 - PROGRAM OPERATION 

.0802 ADDITIONAL ENROLLMENT AND 
PARTICIPATION REQUIREMENTS 

(a) Adult day health programs may serve per- 
sons 18 years of age or older who need so mo 
medical supervision ae4 who need day health 
services in order to maximi^o support their inde- 
pendence and who require one or more of the 
following during the hours of the day health 
program: 

( 1 ) Monitoring of a medical condition; 

(2) Provision of assistance with or supervision 
of activities of daily living; 

(3) Administration of medication, special 
feedings or provision of other treatment 
or services related to health care needs. 

(b) Day health programs shall not enroll or 
contmue to serve persons whose needs exceed the 
capability of the program. P e rsons who cannot 
be served » a day health setting include bwt- afe 
h«4- limited te^ 

f-4 persons who have intravenous tubes » 

\ E 7 I '\. t TO 1 I 9 rl ! H f I t^I tl II O I I_I I 'V 1 t^. TJ tllg \ " ' I I a I " *- / . 

(4) persons who need injections (except 
insulin) administered by program stuff; 

{4} persons who afe non ambulatory. 

(c) Each individual's service plan, in addition 
to the requirements set forth in 10 NCAC 42E 
.1101, shall include the health needs and the goals 
for meeting the health needs of the individual. 

(d) A minimum of 25 percent of the partic- 
ipants in daily attendance in a combination pro- 
gram must be enrolled for adult day care services. 
Enrollment criteria for adult day care participants 
shall be consistent with the following target 
populations: 



1050 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



(1) Adults who do not need nursing super- 
vision but who require complete, full-time 
daytime supervision in order to live in 
their own home or the home of a relative; 
or 

(2) Adults who need help with activities of 
daily living in order to maintain them- 
selves in their own homes; or 

(3) Adults who need intervention in the form 
of enrichment and opportunities for social 
activities in order to prevent deterioration 
that would lead to placement in group 
care; or 

(4) Individuals enrolled in an adult day care 
program who need time-limited support 
in making the transition from independent 
living to group care, or individuals who 
need time-limited support in making the 
transition from group care to independent 
living. 

Statutory Authority G.S. 131D-6. 

.0803 HEALTH AND PERSONAL CARF 
SERVICES 

(a) The following health care and personal care 
services shall be provided: 

(1) personal eafe (assistanc e with assistance 
with activities of daily living including, but 
not limited to feedmg, ambulation, or 
toileting as needed by individual partic- 
ipants; 

(2) health care monitoring of all participants. 
each participant's general health >and 
medical regimen. This includes docu- 
menting the periodic assessment of the 
vital signs, weight, dental health, general 
nutrition, and hygiene of each participant. 
When significant changes occur, positive 
or negative, such changes shall be reported 
as soon as possible to the appropriate 
person (family member, caregiver, friend, 
physician or whomever is responsible for 
the participant). The change in health 
status and notification of the appropriate 
person shall be recorded in the partic- 
ipant's file; 

(3) assistance to participants and caregivers 
with medical treatment plans, a»4 diets, 
and referrals as needed; 

(4) inj e ction ef- insulin by licensed personnel 
fof individual participants, a* needed; 

(4) {Sj health education programs for all par- 
ticipants on a regular basis, at least once 
eaeh- week; monthly; and health care 
counseling tailored to meet the needs of 
participants and caregivers; 

(&} counseling with- individual participants, as 
needed, regarding health care. 



(5) providing first aid treatment as needed. 
(b) Specialized services, e.g. speech therapy, 
physical therapy, and counseling, shall be facili- 
tated by the adult day health program as required 
by a physician and as available through commu- 
nity resources. 

Statutory Authority G.S. 131D-6. 

SECTION .0900 - CERTIFICATION 
INFORMATION 

.0901 PROCEDURE 

(a) All individuals, groups or organizations 
operating or wishing to operate an adult day 
health program as defined by G.S. 131D-6 must 
apply for a certificate to the county department 
of social services in the county where the pro- 
gram is to be operated. 

(b) A designated social worker will supply 
necessary forms and standards for certification 
and will make a study of the program. 

(c) The following forms and materials make 
up on initial certification package and must be 
submitted through the county department of so- 
cial services to the state Division of Social Ser- 
vices: 



(1) The program policy statement; 

(2) Organizational diagram; 

(3) Job descriptions; 

(4) Documentation showing planned ex- 
penditures and resources available to carry 
out the program of service for a ]_2 month 
period; 

(5) A floor plan of the facility showing 
measurements, restrooms and planned use 
of space; 

(6) Form DSS-1498 (Fire Inspection Report) 
completed and signed by the local tire in- 
spector no more than 30 days prior to 
submission with the certification package; 

(21 Form DSS-1499 (Building Inspection 
Report for Day Care Services for Adults) 
completed and signed by the local build- 
ing inspector, or fire inspector or tire 
marshall if a building inspector is not 
available, no more than 30 days prior to 
submission with the certification package; 

(8) Form DSS-2386 (Sanitation Evaluation 
Report) completed and signed by a local 
sanitarian no more than 30 days prior to 
the submission with the certification 
package; 

(9) Written notice and the effective date, if a 
variance of local zoning ordinances has 
been made in order for property to be 
utilized for an adult day health program; 

( 10) A copy of the articles of incorporation, 
bylaws and names and addresses of board 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1051 



PROPOSED RULES 



members, for adult day health programs 
sponsored by a non-profit corporation; 

(11) The name and mailing address of the 
owner if a proprietary program; 

( 12) A medical statement of each staff mem- 
ber certifying to freedom from 
communicable disease and to good health 
signed by a licensed physician, physician 
assistant or nurse practitioner no more 
than 30 days prior to submission with the 
certification package; and 

(13) DSS-6205 (Adult Day Health Certif- 
ication Report). This form must be sub- 
mitted by the county department of social 
senices with a copy to the program. 



(7} DSS-6205 (Adult Day Health Certif- 
ication Report). This form must be sub- 
mitted with the certification package by 
the Department of Social Services to the 
Division of Social Services at least 30 days 
in advance of the expiration date of the 
certificate, with a copy to the program, 
(e) If during the study of the pro .gram it does 
not appear that all standards can be met, the 
county department will so inform the applicant, 
indicating in writing the reasons, and give the 
applicant an opportunity to withdraw the appli- 
cation. Upon the applicant's request, the appli- 
cation will be completed and submitted to the 
Division of Social Sendees for consideration. 



(f} Following review of the certification pack- 
age, a pre-certification visit may be made by staff 
of state Division of Social Services, 
county department of social services, no more (g) The Division of Social Services will 



(d) The following forms and materials make 
up a certification package for the renewal of a 
certification and must be submitted through the 



than 60 days prior to the end of the current pe- 
riod of certification, to the state Division of So- 
cial Services: 



( 1 ) Form PSS-149S (1 ire Inspection Report) 
completed and signed bv the local fire in- 
spector no more than 30 davs prior to 
submission with the certification package; 

(2) Form DSS-1499 (Building Inspection 
Report for Day Care Services for Adults) 
or the equivalent completed and signed 
bv the local building inspector, or fire in- 
spector or tire marshall if a building in- 
spector is not available, no more than 30 
davs prior to submission with the certif- 
ication package when building modifica- 
tions have been made during the previous 
12 months; 



01 



(41 A 



Form DSS-2386 (Sanitation Report) 
completed and signed by a local sanitarian 
no more than 30 day s prior to submission 
with the certification package; 
A medical statement for each staff mem- 
ber 



promptly notify in writing to the applicant and 
the county department of social senices of the 
action taken after a review of the certification 
package and visit, if made. 

Statutory Authority G.S. 131 D-6; 143B-153. 

.0902 CHANGES IN PERSONNEL 

The requirements in 10 NCAC 42E .1208 shall 
control for this Subchapter. 

Statutory Authority G.S. 13/ D-6; 143B-153. 

.0903 THE CERTIFICATE 

The requirements in 10 NCAC 42E .1401 shall 
control for this Subchapter. 

Statutory Authority G.S. 131 D-6; 143B-153. 

.0904 PROVISIONAL CERTIFICATE 

The requirements in 10 NCAC 42E .1402 shall 
control for this Subchapter. 



certilving 



to 



freedom from 



communicable disease and to good health Statutory Authority G.S. 131D-6; 143B-153. 



signed by a licensed physician, physician 
assistant or nurse practitioner no more 
than 12 months prior to submission with 
the certification package; 
(5) An updated copy of the policy statement, 
organizational diagram, job descriptions, 
names and addresses of board members if 
applicable, and a floor plan showing 
measurements, restrooms, and planned 
use of space, if any changes have been 
made sii 



the 



previous certification 



161 



package was submitted; 

Documentation showing planned ex- 
penditures and resources available to carry 
out the program of senice for a J_2 month 
period; and 



.0905 TERMINATION OF CERTIFICATION 

The requirements in 10 NCAC 42E .1403 shall 
control for this Subchapter. 

Statutory Authority G.S. 131 D-6; 143B-153. 

.0906 DENIAL OR REVOCATION OF 
CERTIFICATE 

The requirements in 10 NCAC 42E .1404 shall 
control for this Subchapter. 

Statutory Authority G.S. 131 D-6; 143B-153. 

.0907 PENALTY 

The requirements in 10 NCAC 42E .1405 shall 
control for this Subchapter. 



1052 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



Statutory Authority G.S. 131D-6; I43B-153. 

.0908 PROCEDURE FOR APPEAL 

The requirements in 10 NCAC 42E .1406 shall 
control for this Subchapter. 

Statutory Authority G.S. 131D-6; I43B-153. 

.0909 CORRECTIVE ACTION 

The requirements in 10 NCAC 42E .0705 shall 
control for this Subchapter. 

Statutory Authority G.S. 13ID-6; 143B-153. 



****************** 



No 



otice is hereby given in accordance with G.S. 
1S0B-21 .2 that the Division of Social Services in- 
tends to amend rule(s) cited as 10 NCAC 41 M 
.0001 - .0005; and adopt rule(s) cited as 10 
NCAC 41 M .0006- .0007. 

1 he proposed effective date of this action is July 
1, 1992. 

1 he public hearing will be conducted at 10:00 
a.m. on December 4, 1991 at the Disability De- 
termination Bldg., 322 Chapanoke Rd., Room I , 
Raleigh, N.C. 

JXeason for Proposed Action: To maximize the 
draw-down of federal funds. 

O ommenl Procedures: Comments may be pre- 
sented in writing anytime before or at the public 
hearing or orally at the hearing. Time limits for 
oral remarks may be imposed by the Commission 
Chairman. Any person may request copies of this 
Rule by calling or writing to Donna Creech, Divi- 
sion of Social Services, 325 N. Salisbury St., 
Raleigh, NC 27603, (919) 733-3055. 

CHAPTER 41 - CHILDREN'S SERVICES 

SUBCHAPTER 41M - PAYMENT OF 

GRANTS-IN-AID TO PRIVATE CHILD-CARING 

INSTITUTIONS 

.0001 PURPOSE 

The purpose of this Subchapter is: te establish 

standardo £©f the payment ©f grants in aid funds 

te private child caring institutions aft4 te ostab 

fcb a grant in aid formula te regulate the ©ay- 

mont aft4 distribution ©f such funds. 

(1) to establish standards and procedures for 

the payment of State funds by the Diyision 

of Social Services to private child placing 



agencies and to private residential child care 
facilities for care and services provided to 
children who are in the custody or place- 
ment responsibility of a county department 
of social services; 

(2) to assure the equitable distribution of the 
available funds to the eligible agencies; 

(3) to assure the purchase of the minimum 
sufficient level of care for foster children; 

(4) to assure adequate accountability by the 
eligible agencies for the use of State funds. 

Statutory Authority G.S. 143B-153(2)(d). 

.0002 DEFINITIONS 

As used in this Subchapter, unless the context 
requires otherwise, the following terms shall have 
the meaning specified: 

(4-) Grants in aid funds m e ans social s e rvices 
funds appropriated te the D e partment ©f 
Human Resourc e s by- the North Carolina 
G e n e ral Assembly £©f payment te privato 
child caring institutions. 

f2} Privat e child caring institutions means 
those non stat e agoncios identified by the 
General Ass e mbly a* recipients ©f grants in 
ai4 funds te private child caring institutions. 

(-$) Grant in aid formula moans the Fele pur 
suant te which any appropriat e d grants in 
ai4 funds are apportioned an4 disbursed 
among privato child caring institutions. 

(4) Eligible population means children ter- 

tT^TTTTTTT CT te F TTTTTTT"T r Lit? I •I'tt^t I K?l 1 1 I ft r^TTTTCTT .ft?! T UtT*! 

has plac e ment responsibility an4 who would 
otherwise hve » a» arrangement supervised 
by a county d e partment ©f social s e rvices 

e v r*r\ni Ts~i.*- fLin T «i .--♦ ♦ \-\ <-t t jl^^ivr Koi^ W^^j^ 

ICDCI * I TTTT LTIU [UV[ lIKll 1 1 IV j 1 III f \J \..'\AJX 1 

placed by a county department ©f social 
s e rvices » a living arrangement supervised 
by a private child caring institution. Such 

continue te be m the eligible population if 

rr^^^r crr^ iuj j 1 1 mi i ct y itu v j_ti trzu ha w ui \j 

full time students ©f are accepted fof e nroll 
ment as full time students fof the next 
school term pursuing a high school diploma 
©f its equivalent, a oourso ©f study at the 
college level, ©f a course ©f vocational ©f 
t e chnical training designed te fit them fof 
gainful employment. 
(-§} The average eest- ©f operating a privato 
child caring institution moans the total eost 
©f safe i» aU privato child caring institutions 
divided by the number ©f privato child 
oaring institutions. 4?he average e©st ©f ©p- 
orating a private child caring institution 4©es 

r\ ■ 1 1 i ft .' I i i . l I t 1 t-\ ■ t ivi.'t ft T ,iiliii-iti.\ii ; i t-\ , 1 i"it-nf'i 1 
1 IU I I11UI UUL I riv V\J \TL CI CTTTTCTmTTn CTTTTT CTTTTTni 

improvements. 



6:15 NORTH CAROLINA REGISTER November I, 1 99 1 



1053 



PROPOSED RULES 



(&> The av e rag e eligible population moans a» 
annual average based o» a» actual quarterly 
census. 

( 1) ''State funds" means money appropriated 
by the General Assembly, including federal 
matching funds, to be paid to eligible private 
not-for-profit child placing agencies or pri- 
vate not-for-profit residential child care fa- 
cilities. 

(2) "Child placing agency" means a private 
not-for-profit agency licensed by the De- 
partment of Human Resources to receive 
children for purposes of placement in resi- 
dential child care facilities or family foster 



(3) "Residential child care facility" means a 
private not-for-profit agency licensed or ap- 
proved bv the Department of Human Re- 
sources to operate a staffed premise with 
paid or volunteer staff where children receive 
continuing full-time foster care. Residential 
child care facility includes child-caring insti- 



tutions. group homes, and children's camps 
which provide foster care. 
(4) 'Tligible agency" means an agency which 
during the last State fiscal year before the 



payment system described in this Subchap- 
ter is inaugurated, received a State grant-in- 



aid to a private child-caring institution, or 
any agency which has become eligible to re- 
ceive State funds under Rule .01)03(4) and 
.0003(5) of this Subchapter. 

(5) "Hligjble population" means children 
placed bv a county department of social 
services with a private not-for-profit child 
placing agenc\ or in a private not-for-profit 
residential child care facility. Children who 
are 17. 18. 12 or 20 years old continue to be 
eligible if they are full-time students or are 
accepted for enrollment as full-time students 
for the next school term pursuing a high 
school diploma or its equivalent, a course 
of study at the college level, or a course of 
vocational or technical training designed to 
tit them for gainful employment. 

(6) 'Allowable cost" for each type of care (in- 
stitutional group care, group home care. 
family foster care, emergency shelter care, 



wilderness camping) for each State fiscal 
year means the expenditures of the eligible 
agency during the agency's last complete 
fiscal year to provide the essentials of daily 
living for eligible children in that type of 
care, less the standard foster care board 
payment, and limited to the cap described m 
Rule .0007(b) of this Subchapter. The es- 
sentials of daily living include shelter, meals, 
clothing, personal incidentals, school sup- 
plies, recreation, and individual supervision. 



The per diem allowable cost for each agency 
for each type of care means that agency's 
annual allowable cost divided bv the number 
ot child care days provided by the agency in 
that type of care. When an eligible agency 
begins offering a type of care which it has 
not offered during the last fiscal year, the per 
diem allowable cost for that type of care for 
that agency during the current fiscal year will 
be equal to the average of the per diem al- 
lowable costs for all of the eligible agencies 
currently offering that type of care. 
(7) "Rate of reimbursement" means the per 



centage of each agency's per diem allowable 
cost for each type of care which is eligible for 
State and federal participation. 

Statutory Authority G.S. 143B-153(2)(d). 

.0003 ADMINISTRATION OF STATE FUNDS 

(a) The Division of Social Services shall have 
responsibility for administering grants in aid 
funds State and federal funds appropriated for 
this purpose in accordance with rules established 
by the Social Services Commission. 

fb4 The Division of- Social Services w^H- collab 
orate with the North Carolina Child Care Asso 
ciation to determin e the amount of- grants in aid 
funds which the Division recommends to the 
Secretary ef the D e partment of Human Re- 
sourceo fo? inclusion i» the Department's budgot 
requests. 

fe) Th e Division's budget recommendation w*H 
take iftto account the following factors: 

f4-) the average eost- of operating private 

child canng institutions; 
(3) the receipt of fost e r eafe assistance pay 
ments by private child caring institutions 
from county d e partments of social services 
o» behalf of the eligible population; 
(4} the averag e eligible population » eafe of 

private child caring institutions; a»4 
{4} the difference between the average eost of 
operating private child caring institutions 
a«4 the receipt of fost e r safe assistance 
payments from county departments of 
social servic e s. 
(d) Oft the basis of the grant in aid formula, the 
Division el Social Services shall disburse grants 
in aid funds to privat e child caring institutions 
o» a quarterly basis; except that any- institution 
which does net- meet standards for- payment 
specified t» Rule .000 > 1 of thk Subchapt e r shall 
Hot- receive it* allocation fof the quart e r of quar 
tefS af-tor- the quarter soeb failure to moot stand 
ar-tb> is documented by- the Division of Social 
Services. 

(e} Any grants in aid funds which a?e Hot- tfc- 
bursod to a privat e child caring institution he- 



1054 



6:15 iXORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



L'l Hill \J\J > 



caus a e£ the failur e te- moot < 

during the fourth quarter. 
(b) The State funds administered under this 



Subchapter will be paid by the Division of Social 
Services directly to the eligible agencies. 

(c) The Division of Social Services will collab- 
orate with the North Carolina Child Care Asso- 



ciation to develop the budget proposal for these 
funds to be recommended to the Secretary of 
Human Resources for inclusion in the Depart- 
ment's budget requests. 

(d) The Division's budget recommendation will 
take into account the following factors: 

(1) the projected eligible population for the 
eligible agencies; 

the allowable cost for each type of care 
offered by each eligible agency; 

any proposed change in the reimburse- 
ment for each type of care; 
any inclusion of additional eligible agen- 
cies; 

State and federal funds required to make 
the requested appropriation, separated 
into three components: 

(A) continuation funding for the eligible 
agencies; 

(B) expansion funding to increase the rate 
of reimbursement to the eligible agencies; 

(C) expansion funding to include additional 
eligible agencies. 

(e) To be eligible for receipt of State funds un- 
der this Subchapter, an agency must have been 
licensed or approved by the Department of Hu- 
man Resour ces for the three consecutive years 
immediately 



[21 

(3) 
(41 
(51 



prior to 



to the State fiscal year for 



which the funds are requested, except that an 
agency exercising its exemption from licensure 
under G.S. 131D-10.4 may apply as soon as it is 
licensed or approved by the Department. 

(f) Private not-for-profit child placing agencies 
and residential child care facilities may request 
inclusion in the payment of State funds under 
this Subchapter by submitting to the Division of 
Social Services a written budget request, includ- 
ing the following: 

(1) certification that the agency has signed 
Civil Rights Compliance; 

(2) copy of the agency audit for the last com- 
plete fiscal vear, including a listing of the 
amounts and sources of public funds re- 
ceived for each type of care provided; 
documentation of the agency's allowable 



(11 

(il 



cost for each type of care offered; 

documentation of the average eligible 
population in each type of care provided 
for the last complete fiscal vear; and 



(5) the dollar amount required to include the 
agency at the current rate of reimburse- 
ment for eligible agencies. 

Statutory Authority G.S. I43B-I53(2)(d). 

.0004 PAYMENT OF FUNDS 

(a) Private child oaring institutions which re- 
ceive paym e nt ef grants in aid funds shall moot 
the following standards: 

(4) Each private child caring institution will- 
be providing eafe te- children m the oligi 
ble population during the quarter » 
which they- rocoivo payment; 

(3) Each privato child caring institution will 
carry e» its rosidontial child eafe pursuant 
te- appropriate licensure standards fo* the 
typ e ef eafe provided; 

£3) Each privato child caring institution will 
have filed- with- the Division ef Social Sep- 
vic e s a written statem e nt ef compliance 
with- Title V4 ef the Gml Rights Aet el 
1961 a«4 will have non discriminatory 
admission practices; 

(4) Each private child oaring institution will 
annually submit te the Division ef Social 
Services a report ef it* operations e» 
forms provided fet this purpose; an4 

(4>) Each privat e child caring institution will 
annually submit te- the Division ef- Social 
Services a» independent audit ef its fi- 
nancial records prepared by a c e rtified 
public accountant ef public accounting 
firm. 
fb) '-the Division ef Social Services will dotor 
min e whether privato child caring institutions 
moot conditions sp e cified m Paragraph fa) ef this 
R«le, 

fe) Any privat e child caring institution which 
objects te- the Division's determination concern 
»g compliance with conditions specified i» Par 
a graph fa) e£ th+s Rule will submit its objections 
te- the Secretary ef the Department ef Human 
Resourc e s within 3© working days ef- written Fe- 
ceipt ef the Division's determination. J« such 
instances, the Secretary will then make within 60 
days the final determination ef whether payment 
w+11 be made. 

(a) The Division of Social Services will annu- 
ally compute each agency's allowable cost for 
each type of residential care: institutional group 
care; group home care; family foster care; emer- 
gency shelter care; wilderness camping. For each 
type of care, the annual allowable cost will be 
divided by the number of child care days to de- 
termine the per diem allowable cost. 

(b) The total annual State appropriation will 
be divided into 12 equal monthly appropriations. 
Each monthly appropriation will be distributed 



6:15 NORTH CAROLINA REGISTER November /. 1 99 1 



1055 



PROPOSED RULES 



to the eligible agencies so that each month the 
rate of reimbursement will be the same for each 
type of care and for each eligible agency. 

(c) The Division of Social Services will com- 
pute each eligible agency's monthly payment for 
each type of care based on the p_er diem rate of 
reimbursement times the number of days of care 
provided to children in the eligible population 
during the preceding month. 

Statutory Authority G.S. 143B-153(2)(d). 

.0005 STANDARDS FOR PAYMENT 

(a) -Phe distribution e£ grants in aid funds ohall 
be computed prior to the beginning e£ each fiscal 
y-eaf using most current information »» the av- 
erag e eligibl e population. 

fb4 -Phe following factors shall be used te- 
comput e the amount &{ payment t» each privat e 
child caring institution: 

f44 determine the average eligibl e population 

i» all privat e child caring institutions; 
(-54 divide the total annual appropriation by 

tke average eligible population; then 
f34 multiply the amount d-ae each m e mber ȣ 
the e ligible population by* the average eli- 
gible population » each privato child 
caring institution. 
(a i Each agency receiving State funds under 
this Subchapter shall meet the following stand- 
ards: 

( 1 ) the agency will provide care to children in 
the eligible population during the month 
in which it receives payment; 

(2) the agency will operate its residential child 
care pursuant to the appropriate licensure 
rules for the type of care provided; 

(3) the agency will file with the Division of 
Social Services a written statement of 
compliance with Title VI of the Civil 
Rights Act of 1964 and will have non- 
discriminatory admission policies: 

(4) the agency will annually submit to the 
Division of Social Services a report of its 
operations on forms provided for this 
purpose; and 

(5) the agency will annually submit to the 
Division of Social Services an independent 
audit of its financial records prepared bv 
a certified public accountant or public ac- 
counting firm. 

(b) The Division of Social Services will deter- 
mine whether each agency meets the conditions 
specified in Subparagraph (a)( 1 1 of this Rule. 

(c) Any agency which objects to the Division's 
dctcniiinatioii coiKcnung compliance with con- 
ditions specified in Paragraph (a) of this Rule 
may submit its objections in writing to the Sec- 



retary' of Human Resources within 30 working 
days of the receipt of the Division's written de- 
termination. In such instances, the Secretary will 
make the final determination of compliance 
within 60 days. 

Statutory Authority G.S. I43B-153(2)(d). 

.0006 PHASE IN 

During the first 12 months after the payment 
system described in this Subchapter is inaugu- 
rated, each eligible agency will receive a monthly 
payment per eligible child at least equal to the 
monthly State grant-in-aid payment per child it 
received during the prior J_2 months to the extent 
funds are available for this purpose by the Gen- 
eral Assembly. 

Statutory Authority G.S. 143B-153(2)(d). 

.0007 COST CONTAINMENT 

(a) The Department will base the distribution 
of funds on payment of allowable foster care 
maintenance costs to the extent state and federal 
funds are available. The Department's financial 
obligation will be limited to the annual State ap- 
propriation as determined through the normal 
State budget process plus any federal receipts 
approved in the Department of Human Re- 
sources' budget for this purpose. 

(b) For each annual budget recommendation, 
the Division of Social Services will consult with 
the North Carolina Child Care Association in 
establishing the cap to be placed on the per diem 
allowable cost for each type of care, taking into 
account the following factors: 

( 1 ) the comparative cost data of the eligible 
agencies in providing the type of care; 

(2) the intensity of care required for children 
in the type of care; 

(3) the availability of alternative public fund- 
ing for the type of care; 

(4) utilization rate of licensed capacity; and 

(5) the comparison of available space in the 
type of care to the need for placements by 
department of social services. The cap on 
the per diem allowable cost for each type 
of care will be expressed as a percentile of 
the eligible agencies offering that type of 
care, and the allowable cost for each 
agency will be limited to the maximum 
cost at the designated percentile. 

Statutory Authority G.S. 143B- 153(2) (d). 

TITLE 1 1 - DEPARTMENT OF 
INSURANCE 



1056 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



No 



otice is hereby given in accordance with G.S. 
150B-21 .2 that the N.C. Department of Insurance 
intends to amend rule(s) cited as 1 1 NCAC 6 A 
.0232, .0234, .0401, .0404 - .0405, .0802, .0804; 
repeal rule(s) cited as 11 NCAC 6A .0415; and 
adopt rule(s) cited as 11 NCAC 6A .0238 - .0240, 
.0416, .0508. 

1 he proposed effective date of this action is 
March 1, 1992. 

1 he public hearing will be conducted at 10:00 
a.m. on December 3, 1991 at 430 N. Salisbury 
Street, Dobbs Building, 3rd Floor Hearing Room, 
Raleigh, N.C. 27611. 

l\eason for Proposed Action: To conform with 
recent legislation enacted by the 1991 General 
Assembly. 



Cc 



'Omment Procedures: Written comments may 
be sent to Rick Johnson, Agent Services Division, 
P.O. Box 26387, Raleigh, N.C. 27611. Oral 
presentations may be made at the public hearing. 
Anyone having questions should call Rick Johnson 
at (919) 733-7487, or Ellen Sprenkel at (919) 
733-4529. 

LZdito/s Note: These Rules have been filed as 
temporary rules effective October 3, 1991 for a 
period of ISO days to expire on March 30, 1992. 

CHAPTER 6 - AGENT SERVICES DIVISION 

SUBCHAPTER 6A - AGENT SERVICES 
DIVISION 

SECTION .0200 - DESCRIPTION OF FORMS 

.0232 APPLICATION FOR RESIDENT 
SURPLUS LINES LICENSE 

The "Application for Resident License to Rep- 
resent Surplus Lines Insurer (Form S4-) (Form 
RSL) " shall include personal information and 
other pertinent information to aid the Division 
in determining if the applicant is qualified for that 
license, as well as conditions for the issuance of 
the license. It must be signed by the applicant 
and notarized and include three endorsements. 



Statutory A uthority 

5S-2/-65(b)(2),(f). 



G.S. 



58-2-40; 



.0234 RESIDENT SURPLUS LINES 

LICENSE RENEWAL APPLICATION 

The "Resident Renewal Application for License 
to Represent a Surplus Lines Insurer (Form 
&4 — H (Form RSI - 1) " shall contain personal in- 



formation and other pertinent information to aid 
the Division in determining if the applicant's li- 
cense should be renewed. It must be signed by 
the applicant and notarized. The applicant must 
be a member of a professional association at the 
time of application for renewal. 

Statutory Authority G.S. 58-2-40; 58- 21 -40(d) ; 
58-21-65(d),(f). 

.0238 RENTAL CAR COMPANY LICENSE 
APPLICATION 

The "Application For A Limited I icense For 
A Rental Car Company" shall contain pertinent 
information concerning the rental car company 
and other information that is relevant in aiding 
the Division in determining if the applicant meets 
eligibility requirements for licensing. Fach ap- 
plicant must submit the proper application fee. 
The fee must be paid by a company check, cer- 
tified check, money order, or cashier's check 
payable to the N.C. Department of Insurance. 

Statutory Authority G.S. 58-2-40; 58-33-/7. 

.0239 NONRESIDENT SLRPLLS LINES 
LICENSE APPLICATION 

The "Application for Nonresident I icense to 
Represent Surplus Lines Insurer (Form NRSI.)" 
shall include personal information and other 
pertinent information to aid the Division in de- 
termining if the applicant is qualified for that li^ 
cense, as well as conditions for the issuance of the 
license. It must be signed by the applicant, no- 
tarized, and include three endorsements. 

Statutory Authority G.S. 58-2-40; 58-2/-65(f). 

.0240 NONRESIDENT SLRPLLS LINES 
LICENSE RENEWAL 

The "Non- Resident Renewal Application for 
I icense to Represent a Surplus I ines Insurer 
( Form NRSI- 1 )" shall contain personal infor- 
mation and other pertinent information to aid 
the Division in determining if the applicant's 1L 
cense should he renewed, h must be signed by 
the applicant and notarized. The applicant must 
be a member of a professional association at the 
time of application for renewal. 

Statutory Authority G.S. 58-2-40; 5S-2/-40(d); 
58-2 /-65(f). 

SECTION .0400 - LICENSING PROCEDURES 

.0401 LICENSES: GENERAL PROVISIONS 

(a) All licenses shall specify the kinds of insur- 
ance for which the agent, adjuster, limited repre- 
sentative, motor vehicle damage appraiser or 
broker is licensed. 



6:15 NORTH CAROLINA REGISTER November I, 1991 



1057 



PROPOSED RULES 



(b) AH licensees must be able, upon request, 
to furnish evidence of their licensing authority. 

(c) Licenses issued by the Division are: 

(1) resident or non-resident adjuster; 

(A) company; firm, 

(B) self-emploved, 

(C) hail; 

(2) resident or non-resident agent, 

(3) resident or non-resident limited represen- 
tative, 

(4) resident or non-resident broker, 

(5) resident or non-resident motor vehicle 
damage appraiser, 

(6) resident or non-resident surplus lines 
agent, license. 

(7) corporate surplus lines license, 

(8) corporate partnership, agont, broker e* 
limited representative, 

(9) purchasing group agent or broker, 

( 1 0) risk retention agent or broker, 

(11) foreign military agent, 

( 1 2) temporary license, 

(13) rental car company limited License. 

(d) An agent, limited representative or broker 
may be licensed for any one or several of the 
kinds of insurance enumerated in G.S. 58-33-25 
upon meeting ail qualifications. 

Statutory Authority G.S. 58-2-40; 58-21 '-65(f); 
58-33-17; 58-33-25; 58-33-30(h). 

.0404 LICENSING OF RESIDENT BROKER 

(a) An applicant must be a duly licensed agent 
in North Carolina and have an appointment with 
at least one company for each kind of insurance 
to be brokered. 

(b) A broker's license shaH give gives the holder 
authority to broker only those kinds of insurance 
for which he holds an agent's license and com- 
pany appointment. Brokering must be done 
through a licensed and appointed agent of the 
company with which the business is being placed. 
A broker's licenses does not confer binding au- 
thority; it only gives authority to share in com- 
missions with a writing agent. 

(c) In addition to all required forms, an appli- 
cant must submit a company check, certified 
check, cashier's check or money order, made 
payable to the N.C. Department of Insurance, in 
the amount set forth in G.S. 58-33- 125(a). 

(d) Each applicant shall file with his application 
tfte bond required a surety bond or cash, certif- 
icates of deposit, or securities as provided by 
statute. Anv cash, certificate of deposit, or se- 
curities deposited in lieu of the surety bond shall 
be held in accordance with 11 NCAC 1 IB .0100. 

Statutory Authority G.S. 58-2-40; 

5S-33-30(fl, (h)(1). 



.0405 LICENSING OF NONRESIDENT 
BROKER 

(a) In addition to all required forms, an appli- 
cant must submit a company check, certified 
check, cashier's check or money order made 
payable to the N.C. Department of Insurance, in 
the amount set forth under G.S. 58-33-125(a). 

(b) A nonresident broker's license shall give the 
holder authority to broker only those kinds of 
insurance for which he holds a license as an agent 
in his state of residency. 

(c) Each applicant shall file with his application 
the bond required a surety bond or cash, certif- 
icates of deposit, or securities as provided by 
statute. Anv cash, certificate of deposit, or se- 
curities deposited in lieu of the surety bond shall 
be held in accordance with 11 NCAC 1 IB .0100. 

(d) A nonresident broker must submit an ori- 
ginal home state certification with his application 
stating the kinds of insurance for which he is li- 
censed in his state of residency, and whether he 
is in good standing in his state of residency. A 
letter of certification shall be valid for no more 
than 60 days from date of issuance. 

(e) A nonresident broker may not solicit di- 
rectly or indirectly, but he may participate in 
commissions of brokered business. Brokering 
must be done through a licensed and appointed 
agent of the company with which the business is 
being placed. 



Statutory Authority G.S. 

58-33-30 (f),(h)( 2); 58-33- 125(a). 



58-2-40; 



.0415 LICENSING OF RENTAL CAR 
COMPANIES' EMPLOYEES/ 
REPRESENTATIVES 

fa} A» employee e* other representative ef a 
rental eaf company who solicits ©f &efe p e rsonal 
accident insuranc e (PAI) &f personal effects e»v- 
erago (PEC) » connection with a rental agree 
mi » nt shall be licensed a* a limited representative 
fo+ travel, accid e nt a*4 baggage insuranc e . 

(4*+ Aft employee ©f other representative ef- a 
rental eaf company who solicits ef sell* limited 
liability supplement insurance (LIS) ift con 
nection with a r e ntal agr ee m e nt shall be licensed 
a* a» agent fof foe ae4 casualty insuranc e . 

Statutory Authority G.S. 58-2-40; 66-205. 

.0416 LICENSING OF RENTAL CAR 
COMPANIES 

(a) .An applicant must meet the minimum 
qualifications in G.S. 5S-33-17. 

(b) .An applicant must make application on a 
form prescribed by the Commissioner along with 
the appropriate fee. 



1058 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



(c) An applicant must submit for approval a 
copy of any brochure as required in G.S. 
58-33-17(f)(2). Any changes in the brochure 
must be submitted for approval at least 90 days 
before the proposed effective date of such 
changes. 

(d) An applicant must submit for approval a 
copy of its employee training program. Any 
changes in the training program must be sub- 
mitted for approval at least 90 days before the 
proposed effective date of such changes. 

(e) Each employee of the licensee who sells 
insurance coverages in relation to a rental agree- 
ment must meet the minimum training require- 
ments in the types of insurance authorized in 
G.S. 58-33- 17(e). 

(f) A list of all employees who have successfully 
completed the training course required in G.S. 
58-33- 17(h) and approved by the Commissioner 
must be maintained at each licensee's location 
and must be available for inspection upon re- 
quest by the Commissioner at all times during 
normal business hours. 

(g) The licensee must notify the Commissioner 
in writing of any changes, including changes of 
addresses or the addition of new rental locations, 
within 30 days after such changes. 



(h) The licensee must provide the Commis- 
sioner with any changes of coverages being pro- 
vided or insurers at least 30 davs before the 
effective dates of such changes. If there is a 
change in insurer, the written notification must 
be accompanied bv a newly executed certification 
executed bv the insurer. 

(i) The certification from the insurer providing 
coverage shall include the: 
(1) name of the licensee; 



(2) name of the insurer providing coverage; 

(3) types of coverage being offered; 

(4) policy form number; and 

(5) signature and title of the insurance com- 
pany officer executing the certificate. 

Statutory Authority G.S. 58-2-40; 5S-33-17. 



SECTION .0500 - RENEWAL AND 
CANCELLATION OF LICENSES 

.0508 RENTAL CAR COMPANY LICENSE 
RENEWAL 

(a) The Division will mail the appropriate re- 
newal form to each licensee. 

(b) Lach licensee shall complete and return the 
form bv the specified date and submit the proper 
renewal fee. The fee must be paid by a company 
check, certified check, money order, or cashier's 
check payable to the N.C. Department of Insur- 
ance. 



(c) Any license that is not renewed by the 
specified renewal date will expire as of that date. 

Statutory Authority G.S. 58-2-40; 58-33-17; 
58-33-25(n); 58-33-125. 

SECTION .0800 - CONTINUING EDUCATION 

.0802 LICENSEE REQUIREMENTS 

(a) Life, accident, and health licensees shall 
obtain 12 credit hours during each calendar year 
in approved life, accident, and health courses, 
including mandatory statute and rule update. 

(b) Fire and casualty licensees shall obtain 12 
credit hours during each calendar year in ap- 
proved fire and casualty courses, including man- 
datory statute and rule update. 

(c) Accident and health licensees shall obtain 
12 credit hours during each calendar year in ap- 
proved accident and health courses, including 
mandatory statute and rules update. 

(d) Any person holding more than one license 
to which this Section applies shall moot tfee hs- 
quiromonto fof ea6k such liconoo eaek calondar 
year, obtain 18 credit hours during each calendar 
year, including the mandatory statute and rule 
update for each license; this includes a minimum 
of six credit hours for each kind of License. 

(e) An instructor may receive up to twice the 
credit hours received by the students for some 
courses but may receive no credit hours for oth- 
ers, in the discretion of the Commissioner. 

(f) Licensees shall not receive credit hours for 
instructing or taking or instructing and taking the 
same course more often than one time in any 
three calendar year period except when there are 
major revisions within the course. The Com- 
missioner shall determine whether the revisions 
are substantial enough to allow licensees to re- 
take or reinstruct an approved course within a 
three calendar year period. 

(g) Licensees do not have to obtain credit 
hours for the calendar year in which they are in- 
itially Licensed. 

(h) Licensees shall receive credit hours for a 
course only for the calendar year in which the 
course is completed. Any course requiring an 
examination shall not be considered completed 
until the licensee passes the examination. 

(i) Licensees shall not receive credit hours for 
courses completed prior to January 1, 1991. 

(j) Licensees shall maintain records of all credit 
hours for three years foLlowing the obtaining of 
such credit hours, which records shall be avail- 
able for inspection upon the Commissioner's re- 
quest. 

(k) Nonresident licensees who meet continuing 
education requirements in their home states meet 
the continuing education requirements of this 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1059 



PROPOSED RULES 



Section. Nonresident licensees whose home 
states have no continuing education requirements 
shall meet the credit hour requirements of this 
Section. 

(1) Licensees will be required to complete only 
the mandatory - statute and rule update each year 
if they: 

(1) are age 65 or older; and 

(2) have been continuously licensed in the line 
of insurance for at least 25 years: and 

(3) hold a nationally recognized professional 
designation for the line of insurance. Ac- 
ceptable designations include those listed 
m 1 1 NCAC 6A .0803 (a) and (b); or 

(4) meet the requirements of -J4 NCAC 6A- 
J^Qa 0^4} aft4 QJ, el t&S Ruler Subpar- 
agraphs ( 1 ) and (2) of this Paragraph and 
certify to the Department of Insurance 
annually they are inactive agency owners 
who neither solicit applications for insur- 
ance nor take part in the day to day op- 
eration of the agency. 

(m) Courses completed prior to the issue date 
of a new license do not meet the requirements 
of this Section for that new license. 

Statutory Authority G.S. 58-33-/30. 

.0804 CARRYOVER CREDIT 

(a) No more than 75 percent of the credit hours 
required shall be carried forward from the previ- 
ous year. Fxampl e : M 4-3 credit hours we f=e- 
quirod. only fttfte credit houro may be carried 
over te- the next calendar s e ar. Licensees holding 
one license shall cam- over no more than nine be declined for stated reasons, except for the de^ 
credit hours. Licensees holding more than one terioration of health of an individual msured: 



I\eason for Proposed Action: To facilitate the 
individual accident and health rate revision proc- 
ess as promulgated by statute. 

Comment Procedures: Written comments may 
be sent to Walter James. Actuarial Services Divi- 
sion, P.O. Box 26387, Raleigh, N.C. 27611. Oral 
presentations may be made at the public hearing. 
Anyone having questions should call Walter James 
at (919) 733-3284, or Ellen Sprenkel at (919) 
733-4529. 

CHAPTER 16 - ACTUARIAL SERVICES 
DIVISION 

SECTION .0200 - INDIVIDUAL ACCIDENT AND 
HEALTH INSURANCE 

.0201 MINIMUM LOSS RATIO STANDARDS 

For individual accident and health insurance 
policies and riders delivered in this State, the 
standard minimum guideline loss ratio for con- 
ditionally renewable, guaranteed renewable, and 
noncancelable medical expense and loss of in- 
come type coverages shall be as promulgated bv 
the National Association of Insurance Commis- 
sioners for such coverages. 



Statutory Authority 
58-63-15(7)(bj. 



G.S. 58-2-40; 58-51-95; 



.0202 RENEWABILITY DEFINITIONS 

(a) Conditionally Renewable - Renewal may 



license shall carry over no more than six credit 
hours for anv one license. 



(b) Only whole credit hours can be carried 
over. 

Statutory Authority G.S. 58-33-130. 

****************** 



i\ otice is hereby given in accordance with G.S. 
150B-21 .2 that the N.C. Department of Insurance 
intends to adopt rule(s) cited as 11 SCAC 16 
.0201 - .0204. 

1 he proposed effective date of this action is 
February 1. 1992. 



provided that the declination applies to all in- 
sureds in this State insured under the same policy 
or rider. 

(b) Guaranteed Renewable - Renewal may not 
be declined bv an insurance company for anv 
reason: but the insurance company may revise 
rates on a class basis, 

(c) Noncancelable - Renewal may not be de- 
clined nor may rates be revised bv an insurance 
company. 



£2 



Statutory Authority 
58-63-15(7)(b). 



G.S. 58-2-40; 58-51-95; 



Th 



he public hearing will be conducted at 10:00 
a.m. on December 4, 1991 at 430 A'. Salisbury 
Street. Dobbs Building, Rm. 4085. 4th Floor 
Conference Rm., Raleigh. N.C. 2~61 1 . 



.0203 CONDITIONALLY RENEWABLE 
STATED REASON PROHIBITED 

For policies or riders permitting the adjustment 
of premiums for which the insurer retains the 
right to nonrenew. the following reason or any 
svnonvmous reasons given for nonrenewal are 
no longer appropriate and are therefore disal- 
lowed: 



7060 



6:75 .XORTH CAROLINA REGISTER November 7, 7997 



PROPOSED RULES 



"The insurer is prevented by any law, 
or any regulation, or any ruling of a 
government agency from using a ta^ 
ble of premium rates that the insurer 
has certified as being reasonable in 
relation to the benefits provided un- 
der the policy." 

Statutory Authority G.S. 5S-2-40; 58-51-20. 

.0204 OPTIONALLY RENEWABLE 
PROHIBITED 

The optionally renewable definition, as pre- 
scribed by the National Association of Insurance 
Commissioners, is not permitted in this State 
because policies or riders containing such a defi- 
nition permit insurers to nonrenew an individual 
insured based upon the deterioration of health 
of an individual insured or based upon the claim 
experience of an individual insured. 



Statutory A uthority 
58-63-15(7) (b). 



G.S. 58-2-40; 58-51-95; 



TITLE 15A DEPARTMENT OF 

ENVIRONMENT, HEALTH, AND 

NATURAL RESOURCES 

iV otice is hereby gixen in accordance with G.S. 
150B-21.2 that EHNR - Division of Water Re- 
sources intends to amend rule(s) cited as 15 A 
NCAC 2E .0107; and adopt nde(s) cited as 15.4 
NCAC2E .0301. 

1 he proposed effective date of this action is April 
1, 1992. 

1 he public hearing will be conducted at 7:00 
p.m. on November 21, 1991 at the Ground Floor 
Hearing Room, Archdale Bldg.. 512 N. Salisbury 
St., Raleigh, N.C. 

JXeason for Proposed Action: To comply with 
Senate Bill 943 - An Act to Require the Registra- 
tion of Water Withdrawals and Transfers of One 
Million Gallons or More Per Day. 



Cc 



comment Procedures: All persons interested in 
this matter are invited to attend. Submittal of 
written comments or oral statements are re- 
quested. For more information contact: John 
D. Wray, Division of Water Resources, P.O. Box 
27687, Raleigh, NC 27611. telephone (919) 
733-4064. Written comments will be accepted 
after the hearing until December 6, 1991. 



Hiditor's Note: These Rules have been filed as 
temporary rules effective October 14, 1991 for a 
period of 180 days to expire on April II, 1992. 

JT iscal Note: This Rule affects the expenditures 
or revenues of local funds. A fiscal no~te was sub- 
mitted to the Fiscal Research Division on October 
10, 1991, OSBM on October 10, 1991, N.C. 
League of Municipalities on October 11, 1991 , and 
N.C. Association of County Commissioners on 
October 11, 1991. 

CHAPTER 2 - ENVIRONMENTAL 
MANAGEMENT 

SUBCHAPTER 2E - CAPACITY USE AREA 
WATER WITHDRAWAL 

SECTION .0100 - GENERAL PROVISIONS 

.0107 DELEGATION 

(a) The Director is delegated the authority to 
grant, modify, revoke or deny permits under G.S. 
143-215.15 and G.S. 143-215.16. 

(b) The Director may delegate any permitting 
function given by the rules of this Subchapter. 

(c) The Director is delegated the authority to 
assess civil penalties and request the Attorney 
General to institute civil actions under G.S. 
143-215.17. 

(d) The Director of the Division of Water Re- 
sources is delegated the authority to process ap- 
plications and collect fees for registration of 
surface water withdrawals and transfers under 
G.S. 143-215.22B and G.S. 143-215. 3( lb). 

(e) The Director of the Division of Water Re- 
sources 



drawal 



ma\ 
or 



delegate anv surface water with- 



transter registration processing 



functions given by the rules of this Subchapter. 

Statutoiy Authority G.S. 143-21 5.3(a) ( 1 ). 

SECTION .0300 - REGISTRATION OF SURFACE 
WATER WITHDRAWALS AND TRANSFERS 

.0301 APPLICATION; PROCESSING FEES 

(a) Anv person subject to G.S. 143-215. 22B. 
shall complete, sign, and submit an application 
for registration, on a form provided bv the De- 
partment, to the Director of the Division of Wa- 
ter Resources. The registration application and 
registration processing fee (if applicable) shall be 
mailed to the Division of Water Resources, 
North Carolina Department of Environment, 
Health, and Natural Resources, Post Office Box 
27687, Raleigh, North Carolina 27611-7687. 



(b) Except as otherwise provided in this Rule, 
a nonrefundable registration processing fee in the 
amount of fiftv dollars ($50.00) shall be paid 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1061 



PROPOSED RULES 



when the registration application form is sub- 
mitted 

( 1 ) No registration application form is com- 
plete until the registration processing fee 
is pajd. 

(2) Each facility from which a person with- 
draws or transfers one million gallons per 
day or more must be separately registered. 

The registration application for each fa- 
cility to be registered must include the fee 
in the amount set forth in these Rules. 

(3) A late registration fee in the amount of 20 
percent of the registration processing fee 
shall be assessed as a penalty for failure to 
register bv the deadlines set forth in 199] 
N.C. Sess. laws, c^ 712, Sec. 3. 

(4) Payment of the registration processing, fee 
shall be by check or money order made 
payable to the "N.C. Department of En- 
vironment, Health, and Natural Re- 
sources". The check or money order 
should refer to the water withdrawal or 
transfer registration application. 

(c) Except as otherwise provided in this Rule, 
upon receipt of a properly completed application 
form and the registration processing fee, the ap- 
plicant will be issued a receipt of registration. 

(d) Pursuant to G.S. 143-2 15.3(a) (la), no fees 
are required to be paid under this Rule bv a 
fanner who submits an application for registra- 
tion of a withdrawal or transfer that pertains to 
farming operations. Upon receipt of a properly 
completed application from a farmer, the appli- 
cant will be issued a receipt of registration. 

Statutory Authority G.S. 143-215.3 (a) (la) 
(lb); 143-21 5.22B. 

****************** 



i\ otice is hereby given in accordance with G.S. 
I SOB- 2 1.2 that the North Carolina Wildlife Re- 
sources Commission intends to amend rule(s) 
cited as 15A NCAC 10D .0003. 

1 he proposed effective date of this action is April 
1. 1992. 

1 he public hearing will be conducted at 10:00 
a.m. on December 17, 1991 at Room 386, 
Archdale Building, 512 N. Salisbury Street, 
Raleigh, NC 27604-1188. 



Co 



Re 



reason for Proposed Action: To establish an 
archery zone in portions of the New Hope Game 
L and. 



■ omment Procedures: Interested persons may 
present their views either orally or in writing at the 
hearing. In addition, the record of hearing will 
be open for receipt of written comments from De- 
cember 2, 1991 to January 1, 1992. Such written 
comments must be delivered or mailed to the N.C. 
Wildlife Resources Commission, 512 N. Salisbury 
Street, Raleigh, NC 27604-1 188. 

JLLdito/s Note: This Rule has been filed as a 
temporary rule effective October 3, 1991 for a 
period of 180 days to expire on March 30, 1992. 

CHAPTER 10 - WILDLIFE RESOURCES AND 
WATER SAFETY 

SUBCHAPTER 10D - GAME LANDS 
REGULATIONS 

.0003 HUNTING ON GAME LANDS 

(a) Safety Requirements. No person while 
hunting on any designated game land shall be 
under the influence of alcohol or any narcotic 
drug, or fail to comply with special restrictions 
regarding the use of the Blue Ridge Parkway 
where it adjoins game lands listed in this Rule. 

(b) Traffic Requirements. No person shall 
park a vehicle on game lands in such a manner 
as to block traffic, gates or otherwise prevent ve- 
hicles from using any roadway. 

(cj Tree Stands. It is unlawful to erect or to 
occupy, for the purpose of hunting, any tree 
stand or platform attached by nails, screws, bolts 
or wire to a tree on any game land designated 
herein. This prohibition shall not apply to lag- 
screw steps or portable stands that are removed 
after use with no metal left remaining in or at- 
tached to the tree. 

(d) Time and Manner of Taking. Except 
where closed to hunting or limited to specific 
dates by these regulations, hunting on game lands 
is permitted during the open season for the game 
or furbearing species being hunted. On managed 
waterfowl impoundments, hunters shall not enter 
the posted impoundment areas earlier than 4:00 
a.m. on the permitted hunting dates, and hunting 
is prohibited after 1:00 p.m. on such hunting 
dates; decoys may not be set out prior to 4:00 
a.m. and must be removed by 3:00 p.m. each 
day. No person shall operate any vessel or ve- 
hicle powered by an internal combustion engine 
on a managed waterfowl impoundment. 

No person shall attempt to obscure the sex or 
age of any bird or animal taken by severing the 
head or any other part thereof, or possess any 
bird or animal which has been so mutilated. 

No person shall place, or cause to be placed on 
any game land, salt, grain, fruit, or other foods 
without prior written authorization of the com- 



1062 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



mission or its agent and no person shall take or 
attempt to take any game birds or game animals 
attracted to such foods. 

No live wild animals or wild birds shall be re- 
moved from any game land. 

(e) Hunting Dates: 

(1) Doves may be taken on the following 
game lands and dove hunting is limited to 
Mondays, Wednesdays, Saturdays and to 
Thanksgiving, Christmas and New Year's 
Days within the federally-announced sea- 
son: 

Buncombe County--Browntown Farms 

Game Land 
Guilford County--Guilford County Farm 

Game Land 
Lenoir County--Caswell Farm Game Land 
Wayne County--Cherry Farm Game Land 

(2) Any game may be taken during the open 
seasons on the following game lands and 
hunting is limited to Mondays, Wednes- 
days, Saturdays and Thanksgiving, 
Christmas and New Year's Days. In ad- 
dition, deer may be taken with bow and 
arrow on the opening day of the bow and 
arrow season for deer. Raccoon and 
opossum hunting may continue until 7:00 
a.m. on Tuesdays, until 7:00 a.m. on 
Thursdays, and until midnight on Satur- 
days. Additional restrictions apply as in- 
dicated in parentheses following specific 
designations: 

Ashe County— Carson Woods Game Land 
Bertie County-- Bertie County Game Lands 
Bladen County-- Bladen Lakes State Forest 
Game Lands (Handguns may not be car- 
ried and, except for muzzle-loaders, rifles 
larger than .22 caliber rimfire may not be 
used or possessed. On the Breece Tract 
and the Singletary Tract deer and bear 
may be taken only by still hunting. Deer 
of either sex may be taken on the first 
Wednesday after Thanksgiving and on the 
second Saturday after Thanksgiving.) 
Caswell County--Caswell Game Land 
(That part designated and posted as a 
"safety zone" is closed to all hunting and 
trapping, and entry upon such area for 
any purpose, except by authorized per- 
sonnel in the performance of their duties, 
is prohibited. On areas posted as "re- 
stricted zones" hunting is limited to bow 
and arrow.) 
Catawba and Iredell Counties— Catawba 
Game Land (No deer may be taken from 
the tracts known as Island Point or 
Molly's Backbone.) 
Lenoir County— H.M. Bizzell, Sr., Game 
Land 



Onslow County— White Oak River 
Impoundment Game Land (In addition 
to the dates above indicated, waterfowl 
may be taken on the opening and closing 
days of the applicable waterfowl seasons.) 

Pender County— Holly Shelter Game Land 
(In addition to the dates above indicated, 
waterfowl may be taken on the opening 
and closing days of the applicable 
waterfowl seasons. Deer of either sex may- 
be taken on the first Wednesday after 
Thanksgiving and on the second Saturday 
after Thanksgiving.) 

Richmond, Scotland and Moore Counties- 
Sandhills Game Land (The regular gun 
season for deer consists of the open hunt- 
ing dates from the second Monday before 
Thanksgiving to the third Saturday after 
Thanksgiving except on the field trial 
grounds where the gun season is from the 
second Monday before Thanksgiving to 
the Saturday following Thanksgiving. 
Deer may be taken with bow and arrow- 
on all open hunting dates during the bow 
and arrow season, as well as during the 
regular gun season. Deer may be taken 
with muzzle-loading firearms on Monday, 
Wednesday and Saturday of the second 
week before Thanksgiving week, and 
during the regular gun season. Except for 
the deer seasons above indicated and the 
managed either-scx permit hunts, the field 
trial grounds are closed to all hunting 
during the period October 22 to March 
31. In addition to the regular hunting 
days, waterfowl may be taken on the 
opening and closing days of the applicable 
waterfowl seasons.) Wild turkey hunting 
is by permit only. 

Robeson County-- Bullard and Branch 
Hunting Preserve Game I^and 

Stokes County— Sauratown Plantation 
Game Land 

Yadkin County--! Iuntsville Community 
Farms Game I.and 
(3) Any game may be taken on the following 
game lands during the open season, except 
that: 

(A) Bears may not be taken on lands des- 
ignated and posted as bear sanctuaries; 

(B) Wild boar may not be taken with the 
use of dogs on such bear sanctuaries, and 
wild boar may be hunted only during the 
bow and arrow seasons, the muzzle- 
loading deer season and the regular gun 
season on male deer on bear sanctuaries 
located in and west of the counties of 
Madison, Buncombe, Henderson and 
Polk; 



6:15 NORTH CAROLINA REGISTER November /, 1991 



1063 



PROPOSED RULES 



(C) On game lands open to deer hunting 
located in or west of the counties of 
Rockingham, Guilford, Randolph, 
Montgomery' and Anson, the following 
rules apply to the use of dogs during the 
regular season for hunting deer with guns: 
(i) Except for the counties of Cherokee, 

Clay, Jackson, Macon, Madison, Polk, 
and Swain, game birds may be hunted 
with dogs, 
(ii) In the counties of Cherokee, Clay, 
Jackson, Macon, Madison, Polk, and 
Swain, small game in season may be 
hunted with dogs on all game lands ex- 
cept on bear sanctuaries. 

(D) On Croatan, Goose Creek, New Hope 
and Shearon Harris Game Lands 
waterfowl may be taken only on Mon- 
days, Wednesdays, Saturdays; on 
Thanksgiving, Christmas and New Year's 
Days; and on the opening and closing 
days of the applicable waterfowl seasons; 
except that outside the posted waterfowl 
impoundments on Goose Creek Game 
Land hunting any waterfowl in season is 
permitted any week day during the last 1 
days of the regular duck season as estab- 
lished by the U.S. Lish and Wildlife Ser- 
vice; On the Pamlico Point, Campbell 
Creek, and Spring Creek impoundments 
a special permit is required for hunting on 
those opening and closing days of the 
waterfowl season as well as on those Sat- 
urdays that fall after November 1 of the 
season and on Thanksgiving and New 
Year's day; 

(E) On the posted waterfowl . 
impoundments of Gull Rock Game I^and 
hunting of any species of wildlife is limited 
to Mondays, Wednesdays, Saturdays; 
Thanksgiving, Christmas, and New Year's 
Days; and the opening and closing days 
of the applicable waterfowl seasons; 

(F) On bear sanctuaries in and west of 
Madison, Buncombe, Henderson and 
Polk Counties dogs may not be trained 
or allowed to run unleashed between 
March 1 and October 11; 

(G) On Butner-Falls of Neuse and Person 
Game Lands waterfowl may be taken only 
on Tuesdays, Thursdays and Saturdays, 
Christmas and New Year's Days, and on 
the opening and closing days of the ap- 
plicable waterfowl seasons; 

(H) On Angola Bay, Croatan, Goose 
Creek, Hofmarm Forest and Tuscarora 
Game Lands deer of either sex may be 
taken from the first Wednesday after 



Thanksgiving through the following Sat- 
urday; 

(I) Horseback riding is allowed on the 
Caswell and Thurmond Chatham game 
lands only during June, July, and August 
and on Sundays during the remainder of 
the year except during open turkey and 
deer seasons. Horseback riding is allowed 
only on roads opened to vehicular traffic. 
Participants must obtain a game lands li- 
cense prior to engaging in such activity; 

(J) On the posted waterfowl impoundments 
on the New Hope and Butner-Falls of 
Neuse game lands a special permit is re- 
quired for all waterfowl hunting. 

(K) Additional restrictions or modifications 
apply as indicated in parentheses follow- 
ing specific designations: 

Alexander and Caldwell Counties--Brushy 
Mountains Game Lands 

Anson County--Anson Game Land 

Ashe County- Bluff Mountain Game Lands 

Ashe County—Cherokee Game Lands 

Ashe and Watauga Counties--Elk Knob 
Game Land 

Avery, Buncombe, Burke, Caldwell, 
Haywood, Henderson, Jackson, Madison, 
McDowell, Mitchell, Transylvania, 
Watauga and Yancey Counties—Pisgah 
Game Lands (Harmon Den and 
Sherwood Bear Sanctuaries in Haywood 
County are closed to hunting raccoon, 
opossum and wildcat. Training raccoon 
and opossum dogs is prohibited from 
March 1 to October 1 1 in that part of 
Madison County north of the French 
Broad River, south of US 25-70 and west 
ofSR 1319.) 

Bertie and Washington Counties— Bachelor 
Bay Game Lands 

Beaufort and Pamlico Counties— Goose 
Creek Game Land 

Brunswick County— Green Swamp Game 
Land 

Burke County— South Mountains Game 
Lands 

Caldwell, Watauga and Wilkes Counties— 
Yadkin Game Land 

Carteret, Craven and Jones Counties— 
Croatan Game Lands 

Chatham County— Chatham Game Land 

Chatham, Durham, Orange, and Wake 
Counties-- New Hope Game Lands (On 
areas posted as "archery zones" hunting 
is limited to bow and arrow.) 

Chatham and Wake Counties-Shearon 
Harris Game Land 

Cherokee, Clay, Graham, Jackson, Macon, 
Swain and Transvlvania Counties— 



1064 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



Nantahala Game Lands. Raccoon and 
opossum may be hunted only from sunset 
Friday until sunrise on Saturday and from 
sunset until 12:00 midnight on Saturday 
on Fires Creek Bear Sanctuary in Clay 
County and in that part of Cherokee 
County north of US 64 and NC 294, east 
of Persimmon Creek and Hiwassee Lake, 
south of Hiwassee Lake and west of 
Nottely River; in the same part of 
Cherokee County dog training is prohib- 
ited from March 1 to October 11. It is 
unlawful to train dogs or allow dogs to 
run unleashed on Fires Creek Bear Sanc- 
tuary at any time, except that dogs may 
be used when hunting raccoon or 
opossum and for hunting grouse and 
rabbits during the open seasons. It is 
unlawful to train dogs or allow dogs to 
run unleased on any game land in 
Graham County between March 1 and 
October 11. 
Chowan County--Chowan Game Land 
Cleveland County— Gardner-Webb Game 

Land 
Craven County- -Neuse River Game Land 
Craven County- -Luscarora Game Land 
Currituck County--North River Game Land 
Currituck County-- Northwest River Marsh 

Game Land 
Dare County-- Dare Game Land (No hunt- 
ing on posted parts of bombing range.) 
Davidson, Davie, Montgomery, Rowan and 

Stanly Counties--Alcoa Game Land 
Davidson County--Linwood Game Land 
Davidson, Montgomery and Randolph 

Counties— Uvvharrie Game Land 
Duplin and Pender Counties-Angola Bay 

Game Land 
Durham, Granville and Wake Counties- 
Butner- Falls of Neuse Game Land (On 
portions of the Butner-Falls of Neuse 
Game Land designated and posted as 
"safety zones" and on that part marked 
as the Penny Bend Rabbit Research Area 
no hunting is permitted. On portions 
posted as "restricted zones" hunting is 
limited to bow and arrow during the bow 
and arrow season and the regular gun 
season for deer.) 
Franklin County— Franklin Game I.ands 
Gates County— Chowan Swamp Game 

Land 
Henderson, Polk and Rutherford Counties- 

-Green River Game Lands 
Hyde County-Gull Rock Game Land 
Hyde County— Pungo River Game Land 
Hyde and Tyrrell Counties— New Lake 
Game Land 



Jones and Onslow Counties— Hofmann 

Forest Game Land 
Lee County- -Lee Game Land 
McDowell County— Hickory Nut Mountain 

Game Land 
McDowell and Rutherford Counties- 

Dysartsville Game Lands 
Moore County- -Moore Game Land 
New Hanover County— Sutton Lake Game 

Land 
Person County— Person Game Land 
Transylvania County— Toxaway Game Land 
Vance County— Vance Game Land 
Wilkes County— Thurmond Chatham Game 

Land 
(4) Deer of either sex may be taken on the 

hunt dates indicated by holders of permits 

to participate in managed hunts scheduled 

and conducted in accordance with this 

Subparagraph on the game lands or 

portions of game lands included in the 

following schedule: 
Friday and Saturday of the first week after 

Thanksgiving Week: 

Uwharrie and Alcoa southeast of NC 49 
Third Saturday after Thanksgiving Day: 

Carson Woods 

Thurmond Chatham 
Thursday and Friday of the week before 

Thanksgiving Week: 

Sandhills east of US 1 

Sandhills west of US 1 
Fourth Saturday after Thanksgiving Day: 

Dysartsville in McDowell County 

Hickorynut Mountain in McDowell 
County 

Pisgah in Avery County 

Pisgah in Burke County 

Pisgah in Caldwell County 

Pisgah in McDowell County 

Pisgah in Yancey County 

South Mountains 

Thurmond Chatham 
Application forms for permits to participate 
in managed deer hunts on game lands, to- 
gether with pertinent information and in- 
structions, may be obtained from hunting 
and fishing license agents and from the 
Wildlife Resources Commission. Com- 
pleted applications must be received by the 
Commission not later than the first day of 
October next preceding the dates of hunt. 
Permits are issued by random computer se- 
lection, are mailed to the permittees 30 days 
prior to the hunt, and are nontransferable. 
Each permit is accompanied by an appro- 
priate big game tag. A hunter making a kill 
must tag the deer and report the kill to a 
wildlife cooperator agent. 



6:15 NORTH CAROLINA REGISTER November /, 1991 



1065 



PROPOSED RULES 



(5) The following game lands and Federal 
Wildlife Refuge are closed to all hunting 
except to those individuals who have ob- 
tained a valid and current permit from the 
Wildlife Resources Commission: Bertie, 
Halifax and Martin Counties— Roanoke 
River Wetlands; 

Bertie County-- Roanoke River National 
Wildlife Refuge. 

Caswell County--Caswell Game Land (That 
portion designated and posted as a "Safety 
Zone") 

Dare County--Dare Game Lands (Those 
parts of bombing range posted against 
hunting) 

Davie--Hunting Creek Swamp Waterfowl 
Refuge 

Gaston, Lincoln and Mecklenburg 
Counties— Cowan's Ford Waterfowl Ref- 
uge (except for youth either-sex deer 
hunts by permit only on the first and sec- 
ond Saturdays in October). 

Statutory Authority G.S. 113-134; 113-264; 
113-291.2; 113-291.5; 113-305. 

****************** 



lyotice is hereby given in accordance with G.S. 
150B-2I.2 that the North Carolina Wildlife Re- 
sources Commission intends to amend rule (s J 
cited as 15.4 NCAC I OF .0354. 

1 he proposed effective date of this action is 
February: /. 1992. 

1 he public hearing will be conducted at 10:00 
a.m. on December 2, 1991 at Room 3S6, Archdale 
Building, 512 N. Salisbury Street. Raleigh, NC 
27604-1188. 

lxeason for Proposed Action: A no wake zone 
in the described area must be established to ad- 
dress safety concerns of the public. 

\_s omment Procedures: Interested persons may 
present their views either orally or in writing at the 
hearing. In addition, the record of hearing will 
be open for receipt of written comments from No- 
vember 18. 1991 to December 17. 1991. Such 
written comments must be delivered or mailed to 
the N.C. Wildlife Resources Commission. 512 N. 
Salisbury Street. Raleigh. NC 27604-1188. 

CHAPTER 10 - WILDLIFE RESOURCES AND 
WATER SAFETY 



SUBCHAPTER 10F - MOTORBOATS AND 
WATER SAFETY 

SECTION .0300 - LOCAL WATER SAFETY 
REGULATIONS 

.0354 PITT COUNTY 

(a) Regulated iVrea. Areas. This Rule applies 
to the waters described in this Paragraph: 

(1) The entire inlet of Hardee Creek from the 
Tar River in Pitt County. 

(2) That portion of the Tar River beginning 
at the curve approaching Seine Beach to 
the East side of the Grimesland Bridge as 
marked at each end by appropriate mark- 
ers. 

(b) Speed Limit. No person shall operate a 
motorboat or vessel at greater than no-wake 
speed within the regulated afea areas described in 
Paragraph (a) of this Rule. 

(c) Placement and Maintenance of Markers. 
The Board of Commissioners of Pitt County is 
designated a suitable agency for placement and 
maintenance of markers implementing this Rule. 



Statutory Authority G.S. 75A-3; 75A-15. 

TITLE 21 - OCCUPATIONAL LICENSING 
BOARDS 

lyotice is hereby given in accordance with G.S. 
I50B-2I.2 that the N.C. State Board of Cosmetic 
Art Examiners intends to adopt rule(s) cited as 
21 NCAC 14J .0501 - .0502; and amend rule(s) 
cited as 21 NCAC 14L .0/05. .0216. 

1 he proposed effective date of this action is 
March 1. 1992. 

1 he public hearing will be conducted at 1:00 
p.m. on December 16, 1991 at the Grove Towers, 
Fifth Floor, 1110 Navaho Drive, Raleigh, N.C. 
27609. 

l\eason for Proposed Action: 21 NCAC 14J 
.0501 - .0502 - To cite conditions by which credit 
is allowed for instruction taken in another state 
or country. 21 NCAC 14L .0105 - Grandfather- 
ing manicurists currently teaching manicuring. 21 
NCAC 14L .0216 - Break down the total hours for 
training to clarify, leaving time spent on each sec- 
tion up to the instructor. 

O omment Procedures: The record shall be open 
for 30 days to receive written comments. Written 
comments should be received by the N.C. State 
Board of Cosmetic Art Examiners by December 
II, 1991 , to be considered as part of the hearing 



1066 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



record. Comments should be addressed to Vicky 
R. Goudie, Executive Secretary, N.C. State Board 
of Cosmetic Art Examiners, I 1 10 Navaho Dr., 
Raleigh, N.C. 27609. Requests to speak must be 
in writing and received by December II, 1991 
prior to hearing. Speaking time 10 minutes. 

CHAPTER 14 - BOARD OF COSMETIC ART 
EXAMINERS 

SUBCHAPTER I4J - COSMETOLOGY 
CURRICULUM 

SECTION .0500 - CREDIT FOR 

COSMETOLOGY STUDY OUTSIDE OF 

NORTH CAROLINA 

.0501 APPROVAL OF CREDIT FOR 

COSMETOLOGY INST TAKEN IN 
ANOTHER STATE 

(a) A cosmetology student may receive credit 
for instruction taken in another state it the con- 
ditions set forth in this Rule are met. 



(b) The cosmetology student's record shall he 
certified by the state agency or department that 
issues licenses to practice in the cosmetic arts. 
If this agency or department does not maintain 
any student records or if the state does not give 
license to practice in the cosmetic arts, then the 
records may be certified by any state department 
or state agency that does maintain such records 
and is willing to certify their accuracy. If no state 
department or board will certify the accuracy of 
the student's records, then this Board will not 
give any credit for the out-of-state instruction. 

(c) If the requirements of Paragraph (b) of this 
Rule are met, then the Board will give credit for 
hours of course work and for mannequin and live 
model performances to the extent certified, up to 
the amount of credit that the student would re- 
ceive for instruction in a school licensed by the 
Board. If the certification includes only total 
hours and does not specify what performances 
have been completed, this Board will not give 
any credit for performances completed as part of 
the out-of-state instruction. 

Statutory Authority G.S. 88-10; 88-13. 

.0502 APPROVAL OF CREDIT FOR 

COSMETOLOGY INST TAKEN IN 
ANOTHER COUNTRY 

All approval for credit hours of instruction 
taken in another country shall be reviewed, ap- 
proved or denied on a case-bv-case basis. 

Statutory Authority G.S. 88-10; 88-13. 



SUBCHAPTER I4L - COSMETIC ART 
TEACHERS 



SECTION .0100 - TEACHER QUALIFICATIONS 
AND EXAMINATIONS 

.0105 QUALIFICATIONS - MANICURIST 
TEACHERS 

(a) To be a manicurist teacher, an applicant 
must: 

(1) have a high school diploma or a high 
school graduation equivalency certificate; 

(2) be a registered manicurist in this State; 

(3) have either: 

(A) practiced manicuring in a cosmetic art 
shop for a period equivalent to five years 
of full-time work; or 

(B) completed a 320-hour teacher training 
course in manicuring as set forth in Rule 
14L .0202(b) in an approved cosmetic art 
school and practiced manicuring in a cos- 
metic art shop for a period equivalent to 
six months of full-time work; and 

(4) pass the manicurist teacher's examination. 

(b) The required six months' experience may 
be gained while a manicurist is enrolled in a 
teacher trainee course, but it must consist of ex- 
perience in a cosmetic art shop. 

(c) Applicants who are registered manicurists 
in good standing in this State and who were reg- 
ularly employed in a school in this State as a 
teacher of manicuring before January _U 1991, 
may substitute the equivalent of three years of 
full-time teaching in lieu of the requirements of 
Paragraph (a) of this Rule if they apply for a li- 
cense as a manicurist teacher on or before Janu- 
ary- J^ 1993. After January J^ 1993, such an 
applicant must also meet the requirements of 
Paragraphs (a)( 1) and (4) of this Rule. 

Statutory Authority G.S. 88-23. 

SECTION .0200 -TEACHER PROGRAM AND 
CURRICULUM 

.0216 TEACHER TRAINING CURRICULUM 

(a) To meet the approval of the Board, a 
cosmetologist teacher training course must con- 
sist of at least 800 hours of instruction in theory 
and practical application, divided as follows: 
(1) One hundred fifty hours of instruction on 
methods of teaching and the laws govern- 
ing cosmetology, to include the following 
topics: 

(A) instruction in teaching techniques; 

(B) instruction in preparing lesson plans; 

(C) instruction in preparing class lectures 
and presentations; 

(D) instruction in preparing examinations; 
and 

(E) Chapter 88 of the North Carolina 
General Statutes and the rules of the 
Board. 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1067 



PROPOSED RULES 



(2) Six hundred fifty hours of practice teach- 
ing, to include the following: 

(A) conducting theory classes from pre- 
pared lesson plans; 

(B) preparing and giving examinations; and 

(C) giving practical demonstrations. 

(&} 44> moot t4*» approval ef the Board, a 
manicurist teacher training course must extend 

,-\ I '. \v <i rt, kt-i, i,j , \ T ■ I t 1 f n ,- t t Vi r.\.-\ pj Qflikf j i fl . j in. ll I. 1 1 

u i li ct i ■ l i iv } \i vj i err n. u>' c rm li. liiuiinu nnrr mnTiau 

430 hours ef- training as follows: 

(-4-+ lesson planning a«4 presentations - 50 

hours; 
(-3} testing - 34 hours; 

£3} education - 50 hours (vocabulary dovel 
opmont); 

demonstration a»4 lecturing - 35 hours: 
teaching aid e s - 44 hours; 
classroom management - 34 hours; 
rules afi4 law - 5 hours; 
basic teaching methods - 60 hours; 
(04- teaching principles - 40 hours; 
(44H personality aft4 teaching - 34 hours 
(44-f chemical usage - 40 hours. 
(h) To meet the approval of the Board, a 
manicurist teacher training course must consist 
ill ill ^'■ 1 ' t '-' l'''"i^ ill n^lniLlion in tlu'or\ and 
practical application, divided as follows: 

( 1 ) One hundred and fifteen hours of in- 
struction on methods of teaching and the 
laws governing manicuring, to include the 



(4) 






following topics: 

(A) instruction in teaching techniques: . 

(B ) instruction in preparing lesson plans: 
((.') instruction in preparing class lectures 

and presentations; 

(D) instruction in preparing examinations; 

(E) instruction in chemical usage: and 

( 1 ) Chapter 8S of the North Carolina 
General Statutes and the rules of the 
Board. 



(2) Two hundred and five hours of practice 
teaching, to include the following: 

(A) conducting theory classes from pre- 
pared lesson plans; 

(B) preparing and giving examinations; and 

(C) .giving practical demonstrations. 

Statutory Authority G.S. 88-23. 

****************** 



i V otice is hereby given in accordance with G.S. 
150B-21.2 that the North Carolina State Board 
of Examiners in Optometry intends to amend 
nde(s) cited as 21 NCAC 42J .0001. 

1 he proposed effective date of this action is 
February 1, 1992. 

1 he public hearing will be conducted at 9:00 
a.m. on December 2, 1991 at the offices of 
Womble Carlyle Sandridge and Rice, 227 
Fayetteville Street Mall, 800 Wachovia Building, 
Raleigh. Xorth Carolina. 

IXeason for Proposed Action: To raise fees to 
cover an increase in operational cost. These fees 
have not been raised since June 1989. 

C_ ommenl Procedures: Written comments must 
be received by the Board no later than 5:00 p.m. 
on November 25, 1991 ; requests to make oral 
comments at the hearing must be received by 5:00 
p.m. on November 25, 1991 . Comments and re- 
quests should be addressed to John D. Robinson, 
O.D., Executive Director, 321 East Main Street, 
P.O. Drawer 609, Wallace, North Carolina 
28466-0609. Oral comments may be limited to 3 
minutes. 



CHAPTER 42 - BOARD OF EXAMINERS IN OPTOMETRY 

SUBCHAPTER 42J - FEE SCHEDULE 

.0001 FEES 

The Board hereby establishes the following fees: 

(1) Each application for general optometry examinations $330.00 $400.00 

(2) Each general optometry license renewal $165.00 $215.00 

(3) Each certificate of license to a resident optometrist desiring to change to another state 

or territory $200.00 

(4) Each license issued to a practitioner of another state or territory" to practice in this 

state $250.00 

( 5) Fach license to resume practice issued to an optometrist who has retired from the 
practice of optometrv or who has r e moved moved from and returned to 

this state $250.00 

(6) Each application for registration as an optometric assistant or renewal thereof $ 50.00 

(7) Each application for registration as an optometric technician or renewal thereof $ 50.00 

(8) Each duplicate licensed $ 50.00 



106S 



6:15 NORTH CAROLINA REGISTER November I, 1991 



PROPOSED RULES 



(9) Each renewal license for each branch office $ 35.00 $ 45.00 

(10) Each certificate of registration for a professional corporation $ 50.00 

(11) Each renewal certificate of registration for a professional corporation $ 25.00 

Statutory Authority G.S. 55B-I0; 55B-11; 90-117.5; 90-/23. 

TITLE 24 - INDEPENDENT AGENCIES alleged hazard described in the citation, as a 

result of his assigned duties. 

•» j [5| "Hearing examiner" is synonymous with 

Ivotice is hereby given in accordance with G.S. the "Administrative Law Judge" and means 

150B-21 .2 that the Safety and Health Review a person appointed by the Chairman of the 

Board of North Carolina intends to adopt rules Review Board pursuant to G.S. 95- 135(c). 

cited as 24 NCAC 3 .0101 - .0111, .0201 - .0203, (6) "Authorized employee representative" 

.0301 - .0309, .0401 - .0406, .0501 - .0516, .0601 means a labor organization whether local or 

- .0605, .0701 - .0710. international which has a collective bargain- 

ing relationship with the cited employer and 

The proposed effective date of this action is which represents affected employees. Such 

February 1 . 1992. 2H organization may appear through an au- 
thorized representative. Affected employees 

The public hearing will be conducted at 10:00 EH[ a PP ear 212 5£ (unrepresented by coun- 

a.m. on December 2, 1991 at the N.C. State Bar 2£il or through an attorney. See Rules ,0202 

Building, Council Chambers - Third Floor, 208 and .0203 ol this Chapter. 

Fayetteville Street Mall, Raleigh, North Carolina. & Authorized representative means an 

owner or bona tide lull-time ofheer or em- 

E> „ _ , . . _ , , plovee of a party when the party is an asso- 

Reason for Proposed Action: To adopt mles for aadon~ a" Fa^e7ilup, ~ WoratIo'n~ 

the Safety and Health Review Board to use in other business entity ~ — 

conducting hearings. (8) Citation" m^n~s a written communi- 

C cation issued by the Commissioner to an 

omment Procedures: Anyone wishing to com- employer pursuant to G.S. 95-137. 

ment on these proposed rules should send com- (9) "Notification of p"roposed~penaltv" means 

ments in writing to Doris Hint on at 121 West a written communication issued by the 

Jones Street. Raleigh, NC 27603 by December Commissioner to an employer pursuant to 

1,1991. G.S. 95-137. 

_, ( 10) "Day" means a calendar day. 

Tditor's Xote: These Rules have been filed as LLii "Working day" means all days except 

temporary rules effective October 2, 1991 for a Saturdays. Sundays, and legal holidays. 

period of ISO days to expire on March 30, 1992. OH "Proceeding" means any proceeding be- 
fore the Review Board or hearing examiner. 

CHAPTER 3 - SAFETY AND HEALTH REVIEW Oil "Respondent" means an employer who 

BOARD OF NORTH CAROLINA !lH been issued a citation. 

(14) "Complainant" means the Commissioner 
SECTION .0100 -GENERAL PROVISIONS of Labor of North Carolina. 

(15) l.'nless otherwise specified, definitions set 
.0101 DEFINITIONS ~ forth in G.S. 95-127 are hereby adopted. 

As used herein: 

(1) "Act" means the Occupational Safety and Statutory Authority G.S. 95-135. 

Health Act of North Carolina, Article 16, 

Chapter 95 of the General Statutes. .0102 SCOPE OF RULES: APPLICABILITY 

[2] "Board," "person," "employer," and "em- OF NORTH CAROLINA RLLES 

plovee" have their meanings set forth in G.S. Civil Procedure. 

95-127 of the Act. (1) These rules shall govern all proceedings 

(3) "Commissioner" means the Commissioner before the Review Board and its hearing ex- 
of Labor of North Carolina; "Director" aminers. 

means the officer or agent appointed by the (2) In the absence of a specific provision, pro- 

Commissioner for the purpose of assisting cedure shall be in accordance with the North 

in the administration of the Act. Carolina Rules of Civil Procedure. 

(4) "Affected employee" means an employee 

of a cited employer who is exposed to the Statutory Authority G.S. 95-135. 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1069 



PROPOSED RULES 



.0103 USE OF GENDER AND NUMBER 

(a) Words importing the singular number may 
extend to and be applied to the plural and vice 
versa. 

(b) Words importing one gender may be ap- 
plied to the other. 

Statutory Authority G.S. 95-135. 

.0104 COMPUTATION OF TIME 

(a) In computing any period of time prescribed 
or allowed in these Rules, the day from which the 
designated period begins to run shall not be in- 
cluded. The last day of the period so computed 
shall be included unless it is a Saturday, Sunday. 
or legal holiday, in which event the period runs 
until the end of the next day which is not a Sat- 
urday. Sunday, or legal holiday. When the pe- 
riod of time prescnbed or allowed is less than 
seven davs. intermediate Saturdays , Sundays, and 
legal holidays shall be excluded in the computa- 
tion. 

(b) Where service of a pleading or document 
is by mail pursuant to Rule .Oil)" ot this Section. 
three davs -■! 1. 1 1 1 be added to the time allowed bv 
these Rules for filing of a responsive pleading. 

Statutory- Authority G.S. 95-135. 

.0105 EXTENSIONS OF TIME 

Requests for extensions of time for the filing of 
any pleading or documents must be received in 
the Review Board office three davs in ad\ance 
of the date on which the pleading or document 
is due to be tiled. Such requests may be oral or 
in writing. Oral requests shall be followed bv a 
letter addressed to the Office of the Review 
Board, setting out the substance of the request. 

Statutory Authority G.S. 95-/35. 

.0106 RECORD ADDRESS 

The initial pleading filed bv any person shall 
contain that person's name, address, and tele- 
phone number. Any change in such information 
must be communicated promptly in writing to 
the Review Board, and to all other parties and 
intervenors. A party or intervenor who fails to 
turnish such information shall be deemed to have 
waived his right to notice and service under these 
Rules. 



intervenor by postage prepaid first -class or by 
personal delivery. If affected employees are re- 
presented by an authorized employee represen- 
tative, the Complainant and the Respondent 
shall serve a copy of the Statement of Respond- 
ent's Position, and, where applicable under Rule 
JJ304 of this Chapter, copies of the complaint 
and answer in this case on the authorized em- 
ployee representative in accordance with Para- 
graph (c) of this Rule. Both the Complainant 
and the Respondent shall also serve on any au- 
thorized employee representative notice of any 
request for or proposed modification of abate- 
ment. In cases m which employees are repres- 
ented by authorized employee representative, the 
Complainant and Respondent shall notify the 
Board of this fact within 10 days after filing of 
their Statement of Respondent's Position, and in 
such cases, the Board shall serve on the author- 
ized employee representative notice of hearings 
and copies of any final order of the Board or 
hearing examiners in the manner prescribed by 
Paragraph (c) of this Rule. 

(b) Service upon a party or intervenor who has 
appeared through an authorized representative 
or attorney need be made onlv upon such au- 
thorized representative or attorney. 

(c) Unless otherwise ordered, service may be 
accomplished by postage prepaid first-class mail 
or by personal delivery. Service is deemed ef- 
fected at the time of mailing (if by mail) or at the 
time of personal delivery [if by personal deliveiv). 

Id) Proof of service shall be accomplished by 
a written statement attached to the document 
served which sets forth the date and manner of 
service. Such certificate of service shall be filed 
with the pleading or document. 

(e) Service to employees shall be accomplished 
by posting in at least one location where all af- 
fected employees have an opportunity to read the 
notice or pleading. Proof of posting shall be filed 
not later than the first working day following the 
posting. 

(_fj The notice of contest, 



notice of hearing. 



Statutory Authority G.S. 95-/35. 

.0107 SERVICE AND NOTICE 

(a) At the time of filing pleadings or other 
documents, a copy thereof shall be served by the 
tiling party or intervenor on every other party or 



notice of withdrawal, notice of settlement and 
anv order or decision of a hearing examiner or 
of the Board other than a procedural order, as 
well as the notice informing affected employees 
of their right to elect party status in any pro- 
ceedings pursuant to Rule .021)1 of this Chapter 
and of their right to contest the provisions of the 
abatement period must be posted. 

(g) The notice to affected employees in the 
following form shall be required to be posted to 
comply with the requirements pursuant to Para- 
graph (Jl of this Rule and shall be as follows: 
TO THE EMPLOYEES OF: 

Your employer has been charged 
with a violation of the Occupational 



1070 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



Safety and Health Act of North 
Carolina and is contesting this alleged 
violation before the Safety and 
Health Review Board, an independ- 
ent agency. If you want to have a sav 
in this matter, vou must write to: 
Safety and Health Review Board of 
North Carolina 
121 West Jones Street 
Raleigh, North Carolina 27603. 



As an affected employee, you have a 
right to participate in this matter as 
a party. To participate as a party, 
you must request party status. 
Write to: 

Safety and Health Review Board of 
North Carolina 
121 West Jones Street 
Raleigh, North Carolina 27603. 
(h) The notice of settlement and notice for 
modification of abatement must be posted. 
( 1 ) Settlement. In anv case where a settle- 
ment is proposed, a hearing shall he held 
on request of any party, intervenor, em- 
ployee, or authorized employee represen- 
tative. The employer must post a notice 
indicating that a settlement is proposed 
and that the settlement mav be approved 
bv a hearing examiner, without a hearing, 
unless objection is received from anv 
party, intervenor, employee, or authorized 
employee representative within 1 3 work- 
ing days of the date of the posting of the 
notice of proposed settlement. Such no- 
tice of proposed settlement shall be posted 
promptly after the parties agree on the 
proposed settlement, and in no case later 
than five davs after the agreement on the 
proposed settlement. The notice must 
inform affected employees that they he 



a right to object to the settlement: to re- 
quest and appear at any hearing to object 
to the proposed settlement: and that to 
protect such rights they must write to the 
Safety and I lealth Review Board of North 
Carolina, 121 West Jones Street, Raleigh, 



121 



North Carolina 27603, stating objection 

to the proposed settlement and desire to 

participate. 

Modification of Abatement. In any case 



proposed modification of abatement; and 
that to protect such a right they must file 
notice of their objection within 15 work- 
ing davs from the date of posting of such 
petition for modification of abatement 
and documents pertaining to the case may 
be inspected at the Review Board office. 
Such notice must be tiled with the Safety 
and Health Review Board of North 
Carolina, 121 West Jones Street, Raleigh, 
North Carolina 27603. 
(i) Where a notice of objection to an abatement 
period is filed by an employee or employee rep- 
resentative, it must be served on the 
Complainant, the Department of Labor, and on 
the employer in the manner described in Para- 
graph (c) of this Rule. The employer shall then 
post the notice. 

(j) Where posting is required bv this Rule, such 
posting shall be maintained until the commence- 
ment of a hearing or until earlier disposition un- 
less otherwise provided in these Rules. 

Statutory Authority G.S. 95-135. 

.0108 FILING 

(a) A notice of contest under the provisions of 
Rule .0303 of this Chapter or under the pro- 
visions of Rule .0306 of this Chapter shall be 
tiled with the Director who issued the citation or 
amended citation at the address shown thereon. 



(b) Unless otherwise required by these Rules, 
all other papers relating to the contest shall be 
filed with the Board at Raleigh, North Carolina. 

(c) Lxcept where inconsistent with other of 
these Rules, all filing mav be accomplished by 
first -class mail. 

(d) filing is deemed effected at the time of 
mailing. 



Statutory Authority G.S. 95-135. 

.0109 CONSOLIDATION 

Cases mav be consolidated on the motion of 
any party, or on the Board's or. hearing examin- 
er's own motion where there exist common par- 



tie^ common question of law or fact . or both, 
or in such other circumstances as justice and the 
administration of the Act require. 



where a petition for modification of Statutory Authority G.S. 95-135. 

abatement is filed, the employer must post 

a notice in a conspicuous place of this 

lact, together with a notice that employees 

or authorized employee representatives 

have a right to object to the proposed 

modification of abatement. The notice 



must inform affected employees that they 
have a right to appear to object to the 



.0110 SEVERANCE 

I "pon its own motion, or upon motion of anv 
party or intervenor, the Board or the hearing ex- 
aminer may, for good cause, order anv proceed- 
ing severed with respect to some or aU issues or 
parties. 



6:15 NORTH CAROLINA REGISTER November 1, 1 99 1 



1071 



PROPOSED RULES 



Statutory Authority G.S. 95-135; 

.01 1 1 PROTECTION OF TRADE SECRETS: 
CONFIDENTIAL INFORMATION 

l"pon application by any person, in a proceed- 
ing where trade secrets or other matters may he 
divulged, the confidentiality of which is protected 
bv law, the Board or hearing examiner shall issue 
such orders as may be appropriate to protect the 
confidentiality of such matters. 

Statutory Authority G.S. 95-135. 

SECTION .0200 - PARTIES AND 
REPRESENTATIVES 

.0201 PARTY STATUS 

Affected employees or their authorized em- 
ployee representative may elect to participate as 
parties in an action concerning their employer. 
Such election must ordinarily be made within 3(1 
days pnor to the time the case is set for initial 
hearing on the merits. However, in cases where 
settlement is proposed oy_ modification of abate- 
ment is proposed, such employees or their au- 
thorized employee representative shall have 15 
days after notice, as required by these Rules, of 
the proposed settlement or proposed modifica- 
tion of abatement in which to seek or participate 
as parties in the case and to be heard on any 
questions, including the proposed settlement or 
modification of abatement. 

Statutory Authority G.S. 95-135. 

.0202 INTERVENTION: APPEARANCE BY 
NON-PARTIES 

(a) A petition for leave to intervene mav be 
tiled at am stage of a proceeding before a com- 
mencement of the hearing. 



(b) 1 he petition shall set forth the interest of 
the petitioner in the proceeding and show that 
the participation of the petitioner will assist m the 
determination of the issues in question, and that 
the intervention will not unnecessarily delay the 
proceeding. 

lc) The Board or the hearing examiner may 
grant a petition tor inter, cntion to sucn an extent 
and upon such terms as the Board or the hearing 
examiner shall determine. 

Statutory Authority G.S. 95-135. 

.0203 REPRESENTATION OF PARTIES AND 
INTERVENERS 

(a) Anv party or intervenor mav appear in 
person, through an attorney, through an author- 
ized representative as defined in Rule .0101(6) of 
this Chapter, or through a representative as de- 
fined in Rule .0101(7) of this Chapter. In ac- 



cordance with rules of the North Carolina State 
Bar which govern the practice of law in North 
Carolina, an out-of-state attomev-at-law must 
be associated with a North Carolina attornev-at- 



law in order to appear before either the Review- 
Board or its hearing examiners. 

(b) An authorized representative or an attorney 
of a party or intervenor shall be deemed to con- 
trol all matters respecting the interest of such 
party or intervenor in the proceeding. 

(c) Withdrawal of appearance may be effected 
bv filing a written notice of withdrawal and bv 
serving a copy thereof on the Review Board and 
on all parties and mtervenors. 

Statutory Authority G.S. 95-135. 

SECTION .0300 - PLEADINGS AND MOTIONS 

.0301 FORM 

(a) Except as provided herein, there are no 
specific requirements as to the form of any 
pleading. A pleading is simply required to con- 
tam a caption sufficient to identify the parties in 
accordance with Rule .0302 of this Section, 
which shall include the Board's docket number 
as assigned, and a clear and plain statement of the 
relief that is sought, together with the grounds 
therefor. 

(h) Pleadings and other documents (other than 
exhibits) shall be typewritten and double-spaced. 

(c) Pleadings shall be signed bv the party tiling 
or bv his attorney or authorized representative. 
Such signing constitutes a representation bv the 
signer that he has read the document or pleading; 
that to the best of his knowledge, information. 
and belief the statements made therein are true; 



and that it is not interposed for delay. 

(d) The Board mav refuse for tiling anv plead- 
ing or document which does not comply with the 
requirements of Paragraphs (a) through (c) of 
this Rule. 

Citations to unpu bhshed hearing examiner 



(e) 



Re 



Board decisions 



OS HA cases should includ' 



on North Carolina 
: the names of the 



Commissioner of Labor of North Carolina and 
the respondent-employer, the OSHANC case 
number and year assigned, the letters ' RB" it a 
Review Board decision or hM name if a hearing 
exanuner decision, and the scar decided. 

Inc. 

v. 



Brooks y^ Ace. 
or Brooks 



tor ex- 
OS HA NC 85-1200 
Ace, Inc., OSHANC 



ample 

(RB 19S5 

85-1200 (Jones 1985). Citation to the published 

North Carolina Occupational Safety and Health 

Decisions should follow the form specified 

therein. 

Statutory Authority G.S. 95-/35. 



1072 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



.0302 CAPTION: TITLES OF CASES 

(a) Cases initiated by a notice of contest shall 
be titled "Commissioner of L.abor, Complainant 
v. ( Name of Contestant), Respondent." 

(b) Cases initiated by a petition for modifica- 
tion of the abatement period shall be titled: 
"(Name of Employer), Petitioner v\ Commis- 
sioner of Labor, Respondent." 

(c) Cases initiated by employee objection to the 
abatement period shall be titled as proyided in 
Paragraph (b) of this Rule, with the name of the 
employee or employee representatiye inserted as 
the third party: "(Name of Employer), 
Petitioner \y. (Commissioner of Labor, Respond- 
ent y. ( Name of Employee Employee Represen- 
tatiye). Third Party." 

(d) The titles listed in Paragraphs (a) and (b) 
of this Rule shall appear at the left upper portion 
of the initial page of any pleading or document 
(other than exhibits) files. 

(e) The initial page of any pleading or docu- 
ment (other than exhibits) shall show, at the up- 
per right of the page, opposite the title, the 
docket number, if known, assigned by the Board. 

Statutory Authority G.S. 95-135. 

.0303 CITATION 

(a) The Commissioner shall serve on the Re- 
spondent a citation stating each standard, regu- 
lation, or section of the Act allegedly violated, a 
description of the alleged violation, and the date 
by which the violation must be corrected. 

(b) A recipient of the citation shall have 15 
working days from receipt of such citation to file 
his notice of contest with the Commissioner. 



failure to file a notice of contest within a speci- 
fied time shall be deemed waiver of Respondent's 
right to contest the citation. 

(c) 1 he Commissioner shall, within 10 working 
days of receipt of a notice of contest, transmit the 
original to the Board, together with copies of the 
citation and proposed penalty. 

(d) After the notice of contest is filed, the 
Board ~ 



shall 



the 



employer a form entitled 
Statement of Respondent's (Employer's) Posi- 
tion. "Lhe form entitled "Statement of Re- 
spondent's (Employer's) Position" shall includi 



a notice to the Respondent (Employer) and all 
interested persons that the North Carolina De- 
partment of Labor has issued a citation charging 
certain violations of OS HA standards by t he- 
Respondent (Employer) and shall include the 
date ot the alleged violation and shall further in- 
clude a statement that the purpose of the docu- 
ment is to find out whether the Respondent 
(Employer) admits or denies each of the charges 
or whether the Respondent admits the particular 



violation, but wishes to contest the amount of 
the proposed penalty if any, for that violation. 
On the form, the Respondent (Employer) will 
be instructed to check the appropriate box beside 
each item and to return to: 

Safety and Health Review Board of North 

Carolina 

121 West Jones Street 

Raleigh, North Carolina 27603. 

A copy shall also be mailed to: 

Labor Section 

N.C. Attorney General's Office 

P.O. Box 639 

Raleigh, North Carolina 27602. 

The Statement of Respondent's (Employer's) 

Position shall also contain a notice in bold type 

that: 



IF YOU DO NOT RESPOND IN 
W RUING Willi II I HER THIS 
FORM OR YOUR OWN STALL- 



ING 



VIENT OF POSITION BY MAI1 
OR DELIVERING IT TO 'LHE RE 
VIEW BOARD, POSI MARKED, 
WITHIN 2(1 DAYS FR OM THE DAY 
HIS FORM. 



YOU RECEIVED 
VOIR RIGHT TO CONTEST 1 1 1 1 

LABORS 



DEPARI MINI 



OF 



ALLEGAI IONS IS LOST. 
Both notice of contest and Statement of Re- 
spondent's (Employer's) Position shall include 
employer's name, address, and telephone num- 
ber. 

(e) Any notice of contest shall be deemed to 
adequately raise any issue as to the alleged vio- 
lation or proposed penalty but the employer will 
be limited to the specifics set out in the State- 
ment of Respondent's (Employer's) Position. 

(t) In the Statement of Respondent's (L'm- 
plover's) Position the employer must request 
formal pleadings under Rule .0303 of this Section 
if desired. If the Complainant desires formal 
pleadings, he must file a complaint within 20 
days ot receipt of the Statement of Respondent's 
(Employer's) Position. 

(g) Lhe form for Statement of Respondent's 
(Employer's) Position shall be mailed to the em- 
ployer with the Notice of Docketing. 

(h) failure to set out the reasons for objecting 
to the citation on the hack of the Statement of 
Respondent's (Employer's) Position form shall 
not be grounds for dismissing the notice of con- 
test, but may be grounds for a continuance in the 
discretion of the hearing examiner. 

Statutory Authority G.S. 95-/35. 

.0304 COMPLAINT AND ANSWER 

(a) This section shall only apply where either 
party has, within the time specified iri Rule .0303 
of this Section requested formal pleadings. If 



6:15 NORTH CAROLINA REGISTER November I, 1 99 1 



1073 



PROPOSED RULES 



(Jj The 



formal pleadings are demanded by either party 

then: 

The Commissioner shall file a complaint 
with the Board no later than 20 days after 
formal pleadings are demanded or after 
receipt of the Statement of Respondent's 
(Employer's) Position. The complaint 
shall contain a notice in bold type that: 



(21 



\V I 1 1 1 1 N 20 DAYS OF- RECEIPT OF THE 
COMPL AIM, RESPONDENT MUSE 
Ml E AN ANSWER WITH I HE REVIEW 
BOARD. 



The complaint shall set forth all alleged 
violations and proposed penalties which 
■ ire contested, stalin g \Mth particulants : 

(A) the basis for jurisdiction; 

(B) the time, location, place, and circum- 
stances of each violation; and 

(C) the consideration upon which the pe- 
riod for abatement and proposed penalty 
on each such alleged violation is based. 
The complaint shall not incorporate the 
citation bv reference. 

(3) Where the Commissioner seeks in his 
complaint to amend his citation or pro- 
posed penalty, he shall set forth the rea- 
sons for amendment and shall state with 



(b) 

111 



particularity the change sought. 
Answer. 



Within 20 days after service of the com- 



plaint , the party against whom the com- 
plaint was issued shall file an answer with 
the Review Board. 
(2) The answer shall contain a short and plan 



statement denying each of those 
allegations in the complaint which the 
party intends to contest and stating the 
reasons therefor. Any allegations not de- 
nied shall be deemed admitted. Any af- 
firmative defense must be set out in the 



answer. The Respondent shall not be 
deemed to waive affirmative defense at the 
hearing by failing to request formal 
pleadings. 

Statutory Authority G.S. 95-135. 

.0305 PETITION FOR MODIFICATION OF 
ABATEMENT PERIOD 

(a) An employer may file a petition for mod- 
ification of abatement date when he has made a 
good faith effort to comply with the abatement 
requirements of a citation, but such abatement 

has not Kvn completed hei aiisc of factors be- 
yond his reasonable control. 



(b) A petition tor modification of abatement 
date shall be in writing and shall include the to 1 - 
lowing information: 



(21 

[32 



achieve compliance during the prescribed 
abatement period. 

The specific additional abatement time 
necessary in order to achieve compliance. 

The reasons such additional time is nec- 



UL JLl UUl 111 llli~ /-)*. 

l^tit ct-inll nr\t K.t ^-^- 



( 1) All steps taken by the employer and the 
dates of such action, in an effort to 



essary including the unavailability of pro- 
fessional or technical personnel or of 
materials and equipment, or because nec- 
essary construction or alteration of facili- 
ties cannot be completed by the original 
abatement date. 

(4) All available interim steps being taken to 
safeguard the employees against the cited 
hazard during the abatement period. 

(5) A certification that a copy of the petition 
has been posted and, if appropriate, served 
on the authorized representative of af- 
fected employees, in accordance with 
Subparagraph (c)( 1 ) of this Rule and a 
certification of the date upon which such 
posting and service was made. 

(c) A petition for modification of abatement 
date shall be tiled with the Director of the Office 
of Occupational Safety and Health no later than 
the close of the working day on which abatement 
was originally required. A later-tiled petition 
shall be accompanied by the employer's state- 
ment of exceptional circumstances explaining the 
delay. 

( 1 ) A copy of such petition shall be posted in 
a conspicuous place where all affected 
employees will have notice thereof or near 
such location where the violation oc- 
curred. The petition shall remain posted 
in accordance with Rule .0107(p of this 
Chapter. Where affected employees are 
represented by an authorized represen- 
tative, said representative shall be served 
with a copy of such petition. 
Affected employees or their representative 
may tile an ob|ection in writing to such 
petition with the Director. Failure to tile 
such objection within 15 working days of 
the date of posting of such petition and 
of service upon an authorized represen- 
tative, where required, shall constitute a 
waiver of any further right to object to 
said petition. 

(3) The Commissioner or his duly authorized 
agent shall have the authority to approve 
any petition for modification of abate- 
ment date tiled pursuant to Paragraphs (b) 
and (c) of this Rule. Such uncontested 
petitions shall become final orders pursu- 
ant to N.C.G.S. Section ( J>137(h)( 1) and 
(4J. 

(4) The Commissioner or his authorized rep- 
resentative shall not- exercise his approval 
power until the expiration of J_5 working 



1074 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



days from the date the petition was posted 
or served pursuant to Subparagraphs 
(c)(1) and {2} of this Rule by the em- 
plover, 
(d) Where any petition is objected to by the 
Commissioner or affected employees, the peti- 
tion, citation, and any objections shall be for- 
warded to the Review Board within seven 
working days after the expiration of the 15 
working-day period set out in Subparagraph 
(c)(4) of this Rule. 

(1) The Review Board shall docket and proc- 
ess such objections as expedited pro- 
ceedings as provided for in Rule .0702 of 
this Chapter. 

(2) An employer petitioning for modification 
of abatement period shall have the burden 
of proving in accordance with the re- 
quirements of N.C.G.S. Section 
95- 1 37(b)(4) that such employer has made 
a good faith effort to comply with the 
abatement requirements of the citation 
and that abatement has not been com- 
pleted because of factors beyond the em- 
plover's reasonable control. 

(3) Within It) working days after receipt of 
notice of docketing by the Review Board 
of any objection to the Petition for Mod- 
ification of Abatement Date, each object- 
ing party shall tile a response setting forth 
the reasons for opposing the granting or 
not granting of a modification date ditter- 
ent from that requested in the petition. 

Statutory Authority G.S. 95-/35. 

.0306 EMPLOYER OBJECTIONS TO PERIODS 
OF ABATEMENT 

(a) An affected employee or authorized em- 
ployee representative may aX any time within 15 
working davs after the employer posts a citation, 
file with the issuing Director a notice of contest 
in which objections are made to the period of 
abatement. Lpon receipt of the notice of con- 
test, the Director shall within 10 working davs 
notify the Board thereof. The Director shall 
within 20 davs from his receipt of the notice of 
contest, file a clear and concise statement of the 
reasons the period of abatement is not unrea- 
sonable. 



(b) Not later than 20 davs after receipt of the 
Director's statement referred to in Paragraph (a) 
of this Rule, the objecting employee or author- 
ized employee representative shall file a response 
containing a clear and concise statement of the 
reasons why the abatement period is considered 
improper. The Board shall then afford an op- 
portunity for a hearing in accordance with Rule 
.0702 of this Chapter. 



Statutory Authority G.S. 95-/35. 

.0307 STATEMENT OF POSITION 

At any time prior to the commencement of the 
hearing, any person entitled to appear as a party, 
or any person who has been granted leave to in- 
tervene, may tile a statement of position with re- 
spect to any or all issues to be heard. 

Statutory Authority G.S. 95-/35. 

.0308 MOTIONS 

(a) All motions filed with the Review Board 
prior to hearing before the hearing examiner or 
prior to argument before the Review Board shall 
be in writing, shall be served on the parties, and 
shall set forth reasons supporting the motion. 
All parties upon whom a motion is served shall 
have 10 davs from service to tile a response. 

(b) If oral argument is requested on any mo- 
tion, the request for oral argument should be 
contained in a motion and set out reasons why 
oral argument is requested. Oral argument 
should be granted on a showing of good cause 
as to why such oral argument is required. 

(c) Motions shall, in the ordinary course of 
proceedings, be heard and disposed of by hearing 
examiners to whom the case is assigned or by the 
Review Board when the case ijs before the Rc- 
view Board as a whole. 



(d) .-Vnv party may request an expedited hearing 
on a motion or a hearing on a motion before the 
Review Board. Such motions shall only be 
granted by a showing of good cause. Appeal 
from denial of motion may be heard by the full 
Review Board in its discretion. 



Statutory Authority G.S. 95-/35. 

.0309 FAILURE TO FILE OR SERVE 

I-'ailure to file or serve any pleading pursuant to 
these Rules when due, may in the discretion of 
the Board or the hearing examiner, constitute a 
waiver of the right to further participation in the 
proceedings. 

Statutory Authority G.S. 95-/35. 

SECTION .0400 - PREHEARING PROCEDURES 
AND DISCOVERY 

.0401 WITHDRAWAL OF NOTICE OF 
CONTEST 

At any stage of a proceeding, a party may enter 
a notice of withdrawal of contest when the cita- 
tion contested has been fully complied with, and 
the proposed penalty is paid in full. Anv addi- 
tions, amendments, or deletions from the con- 
tested citation, proposed by the Director, must 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1075 



PROPOSED RULES 



be stated m a notice of settlement. This is sub- Statutory Authority G.S. 95-/35. 



ject to the approval of the Board under the pro- 
visions of Rule .0701 of this Chapter. 

Statutory Authority G.S. 95-135. 

.0402 PREHEARING CONFERENCE 

fa) At anv time before a hearing, the Board or 
the hearing examiner, on its or the hearing ex- 
aminer's motion or on motion of a party, may 
direct the parties or their representatives to ex- 
change information and to participate in a pre- 
hearing conference for the purpose of considering, 
matters which will tend to simplify the issues or 
expedite the proceedings. 

(bi The Board or the hearing examiner m ax- 
issue a pre-hearing order which includes the 
agreements reached by the parties. Such order 
shall be served on all parties and shall be part of 
the record. 

Statutory Authority G.S. 95-/35. 

.0403 REQUEST FOR ADMISSIONS 

(a) At any time after the tiling of responsive 
pleadings, any party may request of any other 
party admissions of facts to be made under oath, 
bach admission requested shall be set forth sep- 
arately. The party upon whom the request is 
made shall serve a response thereto on the re- 
questing party and the Review Board no later 
than 15 davs after service of the request. I he 
request for admissions shall conspicuously state 
that failure to timely respond may subject the 
party to sanctions as provided in Rule .0405 of 
this Section. 

(b) Copies of all requests and responses shall 
be served on all parties in accordance with the 
provisions of Rule .0I()7(a) of this Chapter and 
tiled with the Board within the time allotted and 
shall be a part of the record. 

Statutory Authority G.S. 95-/35. 

.0404 DISCOVERY DEPOSITIONS AND 
INTERROGATORIES 

(a) Except bv order of the Board or the hearing 
examiner, discovery depositions of parties, 
interveners, or witnesses, discovery' inspections 
bv parties or intervenors. and interrogatories di- 
rected to parties or interveners shall not be al- 
lowed. 

ib) In the event the Board or the hearing ex- 
aminer grants an application lor the conduct (A 
such discovery proceedings, the order granting 
the same shall set forth appropriate time limits 
governing the discovery. 



.0405 FAILURE TO COMPLY WITH ORDERS 
FOR DISCOVERY 

If any party or intervenor fails to timely respond 
to a request for admissions filed pursuant to Rule 
.0403 of this Section, or fails to comply with any 
order of the Board or hearing examiner to permit 
discovery in accordance with the provisions of 
these Rules, the Board or the hearing examiner 
may, in it^ his, or her discretion, issue appropri- 
ate orders, including, but not limited to: 

( 1 ) Striking the pleadings or notice of contest 
of the defaulting party and entering iudg- 
ment bv default; 

(2) Taxing attorney fees against the defaulting 
party to be awarded to the opposing party; 

(3) In the case of failure to respond to request 
for admissions, order that the matters re- 
quested are deemed admitted; and 

(4) Such other sanctions justified by the par- 
ticular circumstances. 



Statutory Authority G.S. 95-135. 

.0406 SUBPOENAS ISSUED: MODIFY 

SUBPOENAS: INSPECT AND COPY 
DATA 

(a) Anv member of the Board or the hearing 
examiner shall, on the application of anv party 
directed to the Board, forthwith issue subpoenas 
requiring the attendance and testimony ot wit- 
nesses and the production of anv evidence, in- 
cluding relevant books, correspondence, or 
documents, in his possession or under his con- 
trol. Applications for subpoenas mav be ex 
parte. The subpoena shall show on its face the 
name and address of the party at whose request 
the subpoena was issued. 

(b) Any person served with a subpoena, or a 
subpoena to produce documents shall, within 
five davs after the date of service of the subpoena 
upon him, move in writing to revoke or modify 
the subpoena if he does not intend to comply. 
All motions to revoke or modify shall be served 
on the party of whose request the subpoena was 
issued. The Board or hearing examiner shall re- 
voke or modify the subpoena ih in lts^ his, or her 
opinion, the evidence of which production is re- 
quired does not relate to any matters under in- 
vestigation or in question in the proceedings or 
the subpoena does not describe with sutticient 
particulanty the evidence of which production is 
required, or if for anv other reason sufficient in 
law the subpoena is otherwise invalid. The 
Board or hearing examiner shall make a simple 
statement of procedural or other grounds for the 
ruling on the motion to revoke or modify. The 
motion to revoke or modify, anv answer tiled 



10~6 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



thereto, and any ruling thereon, shall become a 
part of the record. 

(c) Persons compelled to submit data or evi- 
dence at a public proceeding are entitled to re- 
tain, or on payment of lawfully prescnbed costs, 
to procure copies of transcnpts of the data or 
evidence submitted by them. 

(d) Upon the failure of any person to comply 
with a subpoena issued on the request of a party, 
the party, on approval of the Board, may initiate 
proceedings in the appropriate court for the 
enforcement thereof. The Board shall approve 
proceedings for the enforcement of the subpoena 
if in its judgment enforcement of such subpoena 
would be consistent with the law and policies of 
the Act, Lailure to comply with a subpoena may- 
result in imposition of sanctions set out in Rule 
.0405 of this Section. 

Statutory Authority G.S. 95-/35. 

SECTION .0500 - HEARINGS 

.0501 NOTICE OF HEARING 

Notice of the time, place, and nature of a hear- 
ing shall be given to the parties and intervenors 
at least 1 5 days in advance of such hearing, ex- 
cept as otherwise provided in Rule .0702 of thus 
Chapter. 

Statutory Authority G.S. 95-/35. 

.0502 POSTPONEMENT OF HEARING 

(a) Postponement of a hearing ordinarily will 
not be allowed. 

(b) hxcept in the case of an extreme emer- 
gency, unusual circumstances, for good cause 
shown, or upon consent by all parties, no such 
request will be considered unless received in- 
writing at least three days in advance of the time 
set for the hearing. 



Statutory Authority G.S. 95-/35. 

.0503 FAILURE TO APPEAR 

(a) Subject to the provisions of Paragraph (c) 
ot this Rule, the failure of a party to appear at a 
hearing shall be deemed to be a waiver of all 
rights to participate and be heard in the hearing- 
Such parties shall be served with a copy of the 
decision of the Board. 

(b) Requests lor rehearing based on justifiable 
failure to appear must be made, in the absence 
of extraordinary circumstances, within five days 
after the scheduled hearing date. 



Statutory Authority G.S. 95-/35. 

.0504 PAYMENT OF FEES AND MILEAGE TO 
WITNESSES: COURT REPORTERS 

Witnesses summoned before the Board or 
hearing examiner shall be paid the same fees and 
mileage that are paid witnesses in the State 
courts, and witnesses whose depositions are 
taken, and the persons taking the same, shall se- 
verally be entitled to the same fees as are paid for 
like services in the State court. Witness fees and 
mileage shall be paid by the party at whose in- 
stance the witness appears, and the person taking 
a deposition shall be paid by the party at whose 
instance the deposition is taken. 

Statutory Authority G.S. 95-/35. 

.0505 REPORTER'S FEES 

The basic reporter's fees shall be borne by the 
Board, except as provided in Rule .0504 of this 
Section. Parties or intervenors desiring copies 
of a transcript of a hearing shall be responsible 
for the entire cost of preparation of the transcript 
when such transcript has not been requested by 
the hearing examiner pursuant to Rule .0506 of 
this Section or for the Board in cases on appeal. 
Such cost will be determined and set from time 
to time bv the Review Board. 



Statutory Authority G.S. 95-/35. 

.0506 TRANSCRIPT OF TESTIMONY 

(a) Hearings, including testimony and argu- 
ment (on request) shall be transcribed verbatim. 
After a decision has been rendered by the hearing 
examiner and appeal has been taken, three copies 
of the transcnpt of testimony taken at the hear- 
ing, duly certified bv the reporter, shall be tiled 
with the Board. 



(c) 1 he Board or the hearing examiner, upon 
a timely showing of good cause, may excuse such 
tailure to appear. In such event, the hearing may 
be re- scheduled. 



(b) The public proceedings conducted by the 
Review Board and by its hearing examiners may 
be recorded bv an audio-tape recorder bv any 
person in attendance. The Chairman of the Re- 
view Board, or the hearing examiner shall control 
the manner of any tape recording process to en- 
sure that it is not disruptive to the proceeding. 

(c) When desired by the hearing examiner or 
required by appeal, a transcript of the testimony 
shall be prepared for the hearing examiner and 
copies shall be available to any party at a cost of 
ninety cents (SO. 90) per page. If not ordered by 
the hearing examiner or required bv appeal, 
copies of the transcript shall be available to any 
party at a cost of two dollars ($2.00) per page. 
Should it become impossible or extremely im- 
practical for the court reporter to prepare a tran- 
script of the evidence because of mechanical 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1077 



PROPOSED RULES 



failure. loss or destruction of tapes or notes, or 
tor anv other reason, it shall become the duty of 
the parties to prepare a summary' of evidence 
trom their trial notes and best recollection. The 
prevailing parts , or the party designated bv the 
hearing examiner, shall have 30 days from the 
date notice is sent to him bv the hearing exam- 



iner or the Review Board in which to prepare 
and serve upon opposing parts' his proposed 
summary of evidence. The opposing parts shall 
review it and if he disagrees with anv portion 
thereof, or believes that the summary is not 
complete, he shall hase 20 days in which to serve 
upon the prevailing party ans' proposed revisions, 
including anv deletions and additions. If the 
prevailing parts' agrees to such revisions, the two 
parties shall sign a certification that the summary 
of evidence is agreed bv them to accurately reflect 
the substance of the testimony and other esi- 
dence presented at the hearing. If the parties 
cannot agree , their respective versions of the 



ammer and he or she shall resiew the proposals, 
together with the hearing examiners trial notes 
and thereafter enter a ruling as to what consti- 
tutes the summary of evidence, which shall 
thereafter be treated for all purposes as the tran- 
script of the proceedings. 

Statutory Authority G.S. 95-135. 

.0507 DUTIES AND POWERS OF BOARD AND 
HEARING EXAMINER 

It shall be the duty of the Board or its hearing 
examiner to conduct a fair and impartial hearing. 
to assure that the facts are fully elicited to adju- 
dicate all issues and asoid delay. The Board or 
heanng examiner shall have authority to: 
administer oaths and affirmations: 



ill 

(2) issue authorized subpoenas: 

(3) rule upon motions to revoke subpoenas: 

(4) rule upon offers of proof and receive rele- 
sant evidence: 

(5) take or cause depositions to be taken 
whenever the needs of justice would be 
served: 

(6) regulate the course of the hearing and, if 
appropriate or necessary, exclude persons or 
counsel trom the hearing for contemptuous 
conduct and strike all related testimony of 
witnessi i refusing to answer ans' proper 
questions: 

("7) hold conferences for the settlement or 
simplification of the issues: 

(Si dispose of procedural requests or similar 
matters, including motions to amend or dis- 
miss pleadings, to dismiss complaints or 
portion thereof, and to order hearings reo- 



pened or. upon motion, consolidated prior 
to issuance of the decision; 
(9) hear and examine witnesses and to receive 
into the record documentary or other evi- 
dence; 

(10) request the parties at any time during the 
hearing to state their respective positions 
concerning anv issues in the case or theory 
in support thereof; 

(11) adjourn or continue the hearing as the 
needs of justice and good administration re- 
quire; and 

(12) take ans other action necessary under the 
foregoing and authorized bv the published 
rules and regulations of the Board or the 
General Statutes. 



summary shall be submitted to the hearing ex- — !■ — 



Statutory Authority G.S. 95-/35. 

.0508 DISQUALIFICATION OF MEMBER OF 
BOARD OR HEARING EXAMINER 

(a) A member of the Board or the hearing ex- 



aminer may withdraw from a proceeding when- 
ever the Board member or hearing examiner 
deems himself or herself to be disqualified. 

(b) Ans parts mav request a Resiess- Board 
member or hearing examiner, before or at the 
time of the hearing, to withdraw on the grounds 
of personal bias or disqualification, bv filing a 
motion. Such motion shall set forth in detail the 
matters alleged to constitute grounds for dis- 
qualification. 

(c) If, in the opinion of the Resiesv Board 
member or hearing examiner, the motion referred 
to in Paragraph (b) of this Rule is tiled with rea- 
sonable cause and is sufficient on its face, the 
Review Board member or hearing examiner shall 
forthwith be disqualified and withdraw from the 
proceeding. 

(di If the Review Board member or hearing 
examiner denies the request for disqualification 
and does not withdraw trom the proceeding, the 
Resiew Board member or hearing examiner shall 
so rule upon the record, stating the grounds for 
ruling and shall proceed with the hearing, or. if 
the hearing has closed, the Resiew Board mem- 
ber or hearing examiner shall proceed svith the 
issuance of a decision and the pros isions of Rule 
.0601 of this Chapter shall thereupon appls . 

Statutory Authority G.S. 95-135. 



.0509 EXAMINATION OF WITNESSES 

Witnesses shall be examined under oath. Op- 
posing parties shall hase the right to cross^ 
examine ans witness whose testimony is 
introduced bv an adverse party. 

Statutory Authority G.S. 95-135. 



10~ 8 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



.0510 AFFIDAVITS 

An affidavit may be admitted as evidence in lieu 
of oral testimony if the matters therein contained 
are otherwise admissible and the parties agree to 
its admission. 

Statutory Authority G.S. 95-135. 

.0511 GENERAL PROCEDURES: 

DEPOSITIONS IN LIEU OF ORAL 
TESTIMONY 

(a) A motion to take the deposition of a wit- 
ness in lieu of oral testimony shall be in writing 
and shall set forth the reasons such deposition 
should be taken, the name and address of the 
witness, the matters concerning which it is ex- 
pected he will testify, and the time and place 
proposed for the taking of the deposition, to- 
gether with the name and address of the person 
before whom it is desired that the deposition be 
taken (for purposes of this Section, hereinafter 
referred to as "the officer"). Such application 
shall be tiled with the Board or hearing examiner 
and shall be served on all parties and intervenors 
not less than 30 days prior to the time when it is 
desired that the deposition be taken. Any party 
or intervenor may tile a response prior to the 
ruling of the Board, as provided in Rule .0308 
of this Chapter. Where good cause has been 
shown, the Board or the hearing examiner shall 
make and serve on the parties and intervenors an 
order which specifies the name of the witness 
whose deposition is to be taken and the time, 
place, and designation of the officer before whom 
the witness is to testify. Such officer may or may 
not be the officer specified in the application. 

(b) Such deposition may be taken before any 
officer authorized tr> administer oaths by the laws 
of the United States of the place where the ex- 
amination is held. If the examination is held in 
a foreign country, it may be taken before any 
secretary of embassy or legation, consul general, 
consul, vice consul, or consular agent of the 
United States. 



(c) At the time and place specified in the order, 



the otficer designated to take such deposition 
shall permit the witness to be examined and 
cross-examined under oath by all parties appear- 
ing, and the testimony of the witness shall be re- 
duced to typewriting by the officer or under the 
officer's direction. All objections to questions 
or evidence shall be deemed waived unless made 
at the examination. The officer shall not have 
power to rule upon any objection, but shall note 
them upon the deposition. The testimony shall 
be subscribed by the witness in the presence of 
the officer, who shall attach a certificate stating 
that the witness was duly sworn, that the depo- Statutory Authority G.S. 05-/35. 



sition is a true record of the testimony and ex- 
hibits given by the witness, and that the officer 
is not of counsel or attorney to any of the parties 
nor interested in the proceeding. If the deposi- 
tion is not signed by the witness because of ill- 
ness, death, or because the witness cannot be 
found, or waives signing, such facts shall be in- 
cluded in the certificate of the officer and the de- 
position may be used as fully as though signed. 
fhe officer shall immediately deliver one copy 
of the transcript, together with certificate, in per- 
son or by_ registered mail, to the Board. 

(d) The Board or hearing examiner shall rule 
upon the admissibility of the deposition or any 
part thereof. 

(e) All errors or irregularities in compliance 
with the provision of this Rule shall be deemed 
waived unless a motion to suppress the deposi- 
tion or some part thereof is made with reasonable 
promptness after such defect i^ or with due dili- 
gence might have been, discovered. 

(f) If the parties so stipulate in writing, depo- 
sitions may be taken before any person at any 
time or place, upon any notice and in any man- 
ner, and when so taken may be used as other 
depositions. 

Statutory Authority G.S. 95-135. 

.0512 EXHIBITS 

(a) All exhibits offered in evidence shall be 
numbered and marked with a designation identi- 
fying the party or intervenor by whom the exhibit 
i^ offered. 

(b) In the absence of objection by another 
party or intervenor, exhibits shall be admitted 
into evidence as part of the record, unless ex- 
cluded by the Board or hearing examiner pursu- 
ant to Rule .0513 of this Section. 

(c) Unless the Board or hearing examiner finds 
it unpractical, a copy of such exhibit shall be 
given to the other parties and intervenors. 

(d) All exhibits offered, but denied admission 
into evidence, shall be identified as in Paragraph 
(a) of this Rule and shall be placed in a separate 
file designated for rejected exhibits. 

Statutory Authority G.S. 95-135. 

.0513 RULES OF EVIDENCE 

1 Ieanngs before the Board or hs hearing exam- 
iner shall, insofar as practicable, be governed by 
the rules of evidence applicable in the State 
courts. Provided, however, that the Board or 
hearing examiner may exercise the right at all 
times to receive and give due regard to hearsay 
evidence if the interests of justice so require. 



6:15 NORTH CAROLINA REGISTER November I, 1991 



1079 



PROPOSED RULES 



.0514 BLRDEN OF PROOF 

(a) In all proceedings commenced by the filing 
of a notice of contest, the burden of proof shall 
rest with the Commissioner to prove each ele- 
ment of the contested citation by the greater 
weight of the evidence. The burden of proof as 
to all affirmative defenses shall be upon the Re- 
spondent to prove each element of the affirmative 
defense by the greater weight of the evidence. 

(bi hi proceedings under Rule 0305 of this 
Chapter for modification of the abatement pe- 
riod, the burden of proof shall rest with the 
petitioner. 

Statutory Authority G.S. 95-135. 

.0515 OBJECTIONS 

(a) Any objection with respect to the conduct 
of the hearing, including any objection to the in- 
troduction of evidence or a ruling by the Board 
or the hearing examiner, may be stated orally or 
in writing, accompanied by a short statement of 
the grounds for the objection, and such objection 
shall be included in the record. No such ob- 
jection shall be deemed waived by further partic- 
ipation in the hearing. 

(b) Whenever evidence is excluded from the 
record, the partv offering such evidence may- 
make an offer of proof, which shall he included 
in the record of the proceeding. 

Statutory Authority G.S. 95-135. 

.0516 FILING OF BRIEF: ORAL ARGUMENTS 

Anv partv shall be entitled, upon request, to a 
reasonable period at the close of the hearing for 
oral argument, which shall be included in the re- 
cord on request of anv partv. Anv partv may, 
at the discretion of the hearing examiner, be per- 



(a) The decision of the hearing examiner shall 
be in writing and shall include findings of fact, 
conclusions of law, and an order. 



mitted to file a post-hearing brief, proposed 
findings of fact and conclusions of law, or both. 
The Board or the hearing examiner may fix a 
reasonable period of time for such filing, but such 
initial period may not exceed 30 davs, except for 
good cause, from the receipt by the party of the 
transcript of the hearing. Anv party shall be en- 
titled to file a memorandum of additional au- 
thority with the hearing examiner or Review 
Board, within ten days after the date of the 
hearing. 



Statutory Authority G.S. 95-135. 

SECTION .0600 - POST HEARING 
PROCEDURES 

.0601 DECISIONS OF HEARING EXAMINER 



(b) The hearing examiner shall sign the deci- 
sion, and said decision shall be effected from the 
date it is filed with the offices of the Review 
Board. L'pon filing of the decision, jurisdiction 
shall rest solely in the Board, and all motions, 



petitions, and other pleadings filed subsequent to 
such issuance shall be addressed to the Board. 

Statutory Authority G.S. 95-135. 

.0602 REVIEW 

(a) Any member of the Board may direct that 
a decision of a hearing examiner he reviewed by 
the entire Board as a whole. Anv partv may re- 
quest review within 30 davs. If no direction for 
review or request for review is given within 30 
davs of the filing of the hearing examiners order 
with the Board, such order shall become a final 
order of the Review Board. 



(b) A petition for review shall contain a concise 
statement of the order or orders of which review 
is sought. The original and three copies o[ the 
petition shall be filed with the Board. 

(c) A petition for review, timely filed, shall be 
deemed granted upon receipt by the Review 
Board. All interested parties to the original 
hearing shall be notified of the date and the time 
and place of such hearing and shall be allowed to 
appear in person or by representative as previ- 
ously defined. Parties on appeal to the Review 
Board shall file a brief of reasons and supporting 
authorities relied on. Failure to file a brief may 
result in judgment against the parties for failure 
to comply with these Rules, the original and 
three copies of the brief shall be filed with the 
Board. A party shall, prior to the statement of 
facts, designate in his brief those 



pages of the 
transcript relevant to each portion of the decision 
and order of the hearing examiner to which ex- 
ception is taken. The purpose of this Rule is to 
require parties to notify the Review Board of anv 
pages or parts of the transcript which are irrel- 
evant to the decision before the Review Board. 
as well as to notify the Review Board of those 
pages and parts of the transcript which are rele- 
vant. 

(d) I pon review of anv decision of a hearing 
examiner, the Board may adopt, modify, or va- 
cate the decision of the hearing examiner and 
notify the interested parties. The report, deci- 
sion, or delcniiiiiation of t_he Board upon re\ lew 
shall be final unless further appeal is made to the 
court as provided in Rule .0605 of this Section. 

Statutory Authority G.S. 95-135. 



1080 



6:15 NORTH CAROLINA REGISTER November 1, 1 99 1 



PROPOSED RULES 



.0603 STAY OF FINAL ORDER 

(a) Any party aggrieved by a final order or 
other final determination of the Board or hearing 
examiner, may, in cases where the order or de- 
termination is not automatically stayed by oper- 
ation of law, file a motion for a stay. 

(b) Such motion shall set forth the reasons a 
stay is sought and the length of the stay re- 
quested. 

(c) The Board or hearing examiner may order 
such stay for the period requested or for such 
longer or shorter period as is appropriate. 

Statutory Authority G.S. 95-135. 

.0604 ORAL ARGUMENT BEFORE THE 
BOARD 

The Board or hearing examiner shall have the 
right to limit the time used by any party for oral 
argument. 

Statutory Authority G.S. 95-135. 

.0605 JUDICIAL REVIEW 

Any person who is or may be adversely affected 
by a final order or other final determination of 
the Board in a contested case may, within 30 
days from the date such order or determination Statutory Authority G.S. 95-135. 



the Board shall schedule the matter for hearing 
before a hearing examiner. 

Statutory Authority G.S. 95-135. 

.0702 EXPEDITED PROCEEDING 

(a) Upon application of any party or 
intervenor, or upon his own motion, any mem- 
ber of the Board or the hearing examiner may 
order an expedited proceeding. 

(b) The Board or hearing examiner in an ex- 
pedited proceeding shall make necessary rulings 
with respect to time for tiling of pleadings and 
with respect to all matters, without reference to 
times set forth in these Rules, and shall do all 
other things necessary to complete the proceed- 
ing in the minimum time consistent with fairness. 
All parties and intervenors shall be notified of 
any expedited proceedings. 

Statutory Authority G.S. 95-135. 

.0703 STANDARDS OF CONDUCT 

All persons appearing in any proceeding shall 
conform to the standards of ethical conduct re- 
quired in the State courts. 



is entered, seek judicial review in accordance with 
and subject to the provisions of G.S. 95-141 and 
G.S. 15QB. The order shall be deemed entered 
on the date filed and mailed to all parties. J_n 
addition to the copy filed with the court, a copy 
of the petition for judicial review shall be tiled 
with the Review Board office and served on the 
opposing party. 

Statutory Authority G.S. 95-/35. 

SECTION .0700 - MISCELLANEOUS 
PROVISIONS 

.0701 SETTLEMENT 

(a) Settlement is encouraged at any stage of the 
proceedings where such settlement is consistent 
with the provisions and objectives of the Act. 

(b) A notice of settlement submitted by the 
parties shall be accompanied by a clear and con- 
cise explanation of the reasons justifying a settle- 
ment and the assurance of future compliance. 
This settlement shall be deemed effective and 
final only upon approval of the Board or hearing 
examiner. 

(c) Notice of proposed settlement and the 
settlement agreement shall be posted in accord- 
ance with the provisions of Rule .0107(e) of this 
Chapter. As provided in Rule .0107(f) of this 
Chapter, the notice of proposed settlement shall 
be given to affected employees. Upon timely 
receipt of any objection to a proposed settlement, 



.0704 EX PARTE COMMUNICATION 

(a) There shall be no ex parte communication, 
with respect to the merits of any case not con- 
cluded, between the Board, including any mem- 
ber, officer, employee, or agent of the Board who 
is employed in the decisional process, and any 
of the parties or intervenors. 

(b) In the event such ex parte communication 
occurs, the Board or the hearing examiner may 
make such orders to take such action as fairness 
requires. Upon notice and hearing, the Board 
may take such disciplinary action as is appropri- 
ate in the circumstances against any person who 
knowingly and willfully makes or solicits the 
making of a prohibited ex parte communication. 

Statutory Authority G.S. 95-135. 

.0705 RESTRICTION ON PARTICIPATION BY 
COMMISSIONER AND BOARD 
MEMBERS 

The Commissioner or his agent shall not discuss 
any contested case with the Review Board or 
hearing examiners. Review Board members shall 
not be present at or participate in a hearing of 
any matter before a hearing examiner. No hear- 
ing examiner, law clerk, or member of the Re- 
view Board shall at any time during that person s 
tenure in office appear at any level, either ad- 
ministrative or judicial, in any proceeding which 
originated before the Board. 



6:75 NORTH CAROLINA REGISTER November 1, 1991 



I0SI 



PROPOSED RULES 



Statutory Authority G.S. 95-135. 

.0706 INSPECTION AND REPRODUCTION OF 
DOCUMENTS 

(a) Subject to provisions of law restricting 
public disclosure of information, any person, 
mav, at the offices of the Board, inspect and copy 
any document tiled in any proceeding. 

(b) Costs shall be bome by such person. 



No 



Statutory Authority G.S. 95-135. 

.0707 RESTRICTIONS WITH RESPECT TO 
FORMER EMPLOYEES 

No tormer employee of the Board or the Com- 
missioner (including a member of the Board or 
the Director) shall appear before the Board as an 
attorney or other representative for any party in 
any proceeding or other matter, formal or in- 
formal, in which he participated personally and 
substantially during the period of his employ- 
ment. 

Statutory Authority G.S. 95-135. 

.0708 AMENDMENTS TO RULES 

The Board may, at any time upon its own mo- 
tion or initiative, or upon written suggestion of 
any interested person setting forth reasonable 
grounds therefor, amend or revoke any of the 
rules contained herein. Such suggestions should 
be addressed to the Board at Raleigh. North 
Carolina. 



Statutory Authority G.S. 95-/35. 

.0709 SPECIAL CIRCUMSTANCES: 
WAIVER OF RULES 

In special circumstances not contemplated by 
the provisions of these Rules, or for good cause 
shown, the Board or hearing examiner mav, 
upon application bv any party or intervenor, or 
on its own motion, after due notice to all parties 
and intervenors. waive any rules or make such 
orders as justice or the administration of the Act 
requires. 



Statutory Authority G.S. 95-/35. 

.0710 PENALTIES 

(a) All penalties assessed bv the Board are civil. 

(b) 1 he Board has no jurisdiction under G.S. 
^5- 13 c > and will conduct no proceedings there- 
under. 

Statutory Authority G.S. 95-/35. 

TITLE 25 - OFFICE OF STATE 
PERSONNEL 



otice is hereby given in accordance with G.S. 
I50B-2I.2 that the Office of State Personnel in- 
tends to amend rule(s) cited as 25 NCAC ID 
.0303, .0308, .1001, .1003, .1006; 1L .0201 - 
.0203; repeal rule(s) cited as 25 NCAC ID .1004, 
.1007; and adopt rule(s) cited as 25 NCAC ID 
.1010. 

1 he proposed effective date of this action is 
March 1, 1992. 

1 he public hearing will be conducted at 9:00 
a.m. on December 4, 1991 at the Personnel De- 
velopment Center, 101 W. Peace Street, Raleigh, 
North Carolina. 

Ixeason for Proposed Action: 25 NCAC ID 
.0303 - To establish effective date for promotions 
and explain situations when appropriate not to 
give promotional increases on the effective date. 
25 NCAC ID .0308 - To provide clarification and 
guidance to agencies in implementing the policies 
on salary increases. 25 NCAC ID .1001 - To re- 
fine and clarify the definition of reinstatement and 
to outline available agency options upon such 
reinstatement. 25 NCAC ID .1003 - Changes 
definition of break in service from 31 calendar 
days to more than one-half the work days in the 
month. 25 NCAC ID .1004 - Repeal outdated 
policies no longer utilized. 25 NCAC ID .1006 - 
Changes period of time when benefits reinstated 
following separation from employment and reem- 
ployed, from three years to five years. 25 NCAC 
ID .1007 - Repeal policy no longer utilized. 25 
NCAC ID .1010 - To provide guidance to agen- 
cies in salary administration where an employee 
is reinstated. 25 NCAC 1L .0201 - To provide 
guidance and clarification to agencies on training 
policies and establish that agencies implement a 
method for documenting attendance to training of 
employees. 25 NCAC 1L .0202 - To provide 
guidance and clarification to agencies in imple- 
menting the policy on education and training. 25 
NCAC 1L .0203 - To clarify agency responsibility 
in identifying training modules and resources. 



Cc 



- omment Procedures: Interested persons may 
present statements either orally or in writing at the 
Public Hearing or in writing prior to the hearing 
by mail addressed to Barbara Coward, Office of 
State Personnel, 116 W. Jones Street, Raleigh, 
North Carolina 27603. 

CHAPTER 1 - OFFICE OF STATE PERSONNEL 
SUBCHAPTER ID - COMPENSATION 



1082 



6:15 NORTH CAROLINA REGISTER November I, 1991 



PROPOSED RULES 



SECTION .0300 - PROMOTION 

.0303 EFFECTIVE DATE 

(a) Permanent promotions shall be made ef- 
fective on the first day of the pay period. Such 
requests cannot be made effective earlier than the 
first day of the following month when received 
after the tenth of the month. 

(b) The required promotional increase shall be 
given on the effective date of the promotion, un- 
less a specific salary limitation h published in 
advance. 

(c) If the desired amount of increase is not 
given on the effective date of the promotion, be- 
caus e ef- unavailable) funds ef equity consider 
ations, an additional increase(s) up to the full 
allowable amount may be given at a later date(s) 
on a current basis. Additional increases are lim- 
ited to two occurrences after the initial promo- 
tional increase and must be awarded within 24 
months of the original effective date of the action. 
If a subsequent promotion, reallocation up or 
down, demotion or reassignment occurs, this 
cancels the authorization to grant additional in- 
creases as a result of the previous promotion. If 
increases are to be given at later dates, a notation 
must be entered on the form stating the reason 
the increase is being delayed and showing the 
dollar amount of the allowable increase, the 
amount given, and the balance that may be given 
later. The personnel actions submitted later 
must state "Promotional Increase" in the de- 
scription of action block, which will denote that 
this is a delayed increase. 

(d) If no additional increase is to be given at a 
later date, no notation is necessary. 

(e) Temporary promotions may be made ef- 
fective on the date that an employee is officially 
placed in an "acting" capacity. 

Statutory Authority G.S. 126-4. 

.0308 SALARY INCREASES 

The purpose of a promotional pay increase is 
to reward the employee for the assumption of 
duties more responsible and more difficult than 
those in the current position. Subject to the 
availability of funds, salary increases, not to ex- 
ceed the maximum of the range, may be given in 
accordance with the following: 

(1) Permanent Promotion: 

(a) Salaries at the hiring rate shall be increased 
to the new hiring rate. 

(b) Salaries at the minimum rate or within the 
range shall be increased to the new mini- 
mum rate of the grade to which promoted 
or by five percent, whichever is larger. 
Exceptions: 



(i) A promotional increase is not required 
if a specific salary rate or limitation is 
published in advance of a promotional 
offer because of internal salary equity or 
budget considerations in the receiving 
work unit or agency. If this occurs, a 
salary increase above the salary rate 
posted may not be paid. a«4 m> salary 
incr e as e may be requested at- a later dato. 
If conditions change that eliminate the 
equity problem or if additional funds be- 
come available that can be used for this 
purpose, agency management may con- 
sider an additional increase in accordance 
with the provisions outlined under Rule 
.0303 of this Section. 

(ii) If the employee's salary is above the 
maximum as a result of a reallocation 
down, no increase can be given, but the 
salary may remain above the maximum. 

(c) If the employee is promoted to a position 
within the same class series or occupa- 
tional group that is two pay grades or 
more above the current position, the sal- 
ary may be increased by up to ten percent. 
An increase of more than ten percent, the 
total not to exceed five percent for each 
grade provided by the promotion, may be 
considered if the employee has directly 
related training and, or experience above 
the minimum requirements to qualify for 
the salary requested. 

(d) {ej If the employee being is promoted to a 

position in a different occupational area, 
the salary may be increased bv more than 
live percent, the total not to exceed five 
percent for each grade provided bv the 
promotion, if the employee has bad di- 
rectly related training an4 and or experi- 
ence above the minimum requirements to 
qualify for the salary requested. which 
exceeds the minimum qualifications fef 
the position, the salary may- be increased 
by- more than five percent commensurate 
with the related training an4 experience, 
the total not- te- exceed five p e rc e nt fi*f 
each salary grade provided by- the ppe- 
motion. The nature and magnitude of the 
change in jobs, the need to maintain eq- 
uity of salaries within the work unit, and 
other management needs must be given 
consideration when making salary deci- 
sions. Agency management is responsible 
for assuring that inequities are not created. 
If such requests. I lowever, if an employee 
has been reduced to a lower salary grade 
through demotion, reassignment, reallo- 
cation or salary range revision, but with- 
out a corresponding reduction in salary, 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1083 



PROPOSED RULES 



and the employee is later promoted to a 
position with a higher grade, the number 
of grades in the original reduction shall be 
considered to have been compensated and 
shall not be considered in the salary set- 
ting procedure in this Rule. If the re- 
duction in grade occurred as much as 24 
months previously, the agency may give 
consideration to granting a salary' increase 
within the provisions of this policy. Fac- 
tors to be considered are the nature of the 
change in jobs and the need to maintain 
equity of salaries within the work unit. 

(e) Only with the prior approval of the State 
Personnel Director and only in well- 
documented cases which involve circum- 
stances such as severe labor market 
conditions, unusual change in the scope 
of work, extraordinary qualifications, or 
resolution of serious equity problems will 
salary increases be considered which 
equate to more than five percent for each 
grade provided by the promotion. Per- 
sonnel forms must include the justifica- 
tion. 

(f) (4> If the employee is to receive a perform- 

ance salary increase on the same date as 
the promotion, the increase may be given 
before the promotional increase. 

(g) (f) If an employee is promoted from a class 

for which there is no special entry rate 
into a class which has a special entry rate, 
the employee's salary may be increased 
by the amount of the promotional in- 
crease plus the percent difference between 
the minimum and the special entry rate 
authorization. 
(2) Temporary Promotion: 
(a) Temporary promotions may be made 
when an employee is placed in an 
"acting" capacity for a period of time. 
When an employee is placed in an 
"acting" capacity, at the discretion of 
management, one of the following may 
occur: 

(i) The employee may be placed in the 
higher level position (if vacant) with an 
understanding that he will return to the 
former position and salary when the posi- 
tion is filled. 

(ii) A salary adjustment may be given in the 
present position with the understanding 
that the salary will be decreased when the 
"acting" capacity terminates. Indicate in 
Section 21 of the PD-105 the position 
number and classification for wluch the 
employee is serving in an "acting" capac- 
ity. .Also include expected duration of 
"acting" capacity. 



(b) The provisions for salary increases for 
permanent promotions apply in either 
case, except that the provision for a man- 
datory increase may not be applicable. 

(c) The length of time that an employee is in 
an acting capacity should be limited, and 
the amount of promotional salary increase 
determined by the degree of assumption 
of the higher level duties. 

Statutory Authority G.S. 126-4. 

SECTION .1000 - REINSTATEMENT 

.1001 DEFINITION 

Reinstatement is: 

(1) the reemployment in permanent status of a 
former permanent full-time or permanent 
part-time employee with a break in service 
and within a opacified timo period based e» 
length ef continuous servic e ; tf the contin 
uouo period »f s e rvice was less than throo 
years, the employee shall be e ligible fof 
consideration fof reinstatement within the 
three years following the date e£ separation; 
4 the continuous period ef- scrvico was throo 
years ef longer, the timo fef eligibility fof 
reinstatement is unlimited. Pet rein 
statement under competitive service), the »- 
dividual must have been t& good standing 
at- the time »f separation, five years follow- 
ing the date of separation. Although the 
employee is eligible for reinstatement to 
permanent status, the agency head may 
choose to offer reemployment with a 
probationary appointment. The employee 
will meet all requirements of the 
probationary period the same as for original 
appointments; 

(2) the return to a non exempt nonpolicv- 
making position of an employee who trans- 
ferred to or occupied a position designated 
as poficv-making exempt. A» employee 

' > i ♦ I i T ■ i • , i . -i r r-r-, .-» t-. | , ■ , t »^ t i ti i i , "i i l ..- i -f\ -I w-r i-t T i-nn'i .--ft 

m iiii rrru err 1 1 itti v CTTnTTTmrmr' t wb " ™ I 3QX T l^."^. 

i» a non exempt position shall, upon leaving 
the exempt position, have priority to aȴ 
non exempt position available fof which he 
» qualified. 

Statutory Authority G.S. 126-4. 

.1003 BREAK IN SERVICE 

A break in service occurs when an employee is 
in non-pay status for more than £1 calendar days. 
one-half the workdays in the month. (An em- 
ployee is in pay status when working, when on 
paid leave or when on workers' compensation 
leave. An employee is not in pay status after the 
last day of work when separated because of res- 



1084 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



PROPOSED RULES 



ignation, dismissal, death, retirement or reduction 
in force.) Periods of leave without pay do not 
constitute a break in service. 

Statutory Authority G.S. 126-4. 

.1004 SALARY RATE UPON REINSTATEMENT 

There ape alt e rnatives fop determining the oalary 

— Q * a ♦ n 'i t Q r\ 'ini-i/-iintin n iufhniiti' rtn ■ i \ : »-. -wiii, ir-t dir 
I U CC IUUL Hi 1 UL'L'IMlllUlh tTTTTTTTTrTTT 1 1 1U T 1 *-'^I CR7?T H ' I 

aft employee being roinstatod. Those alternatives 

ape* 
(44 The samo salary pate the omployoo was re- 
ceiving at- the time ef separation, if it is 
within the salary rango fop the class to which 

I | , t 1 J-' 111 M T"H * f i Mil' t ' * i.l ,-t t- ^*m I j-» 1 1 - ,"»«- i-.il'ifi; «-•-.♦ f-t 
1 IV- ITT L'^ llli, rUTTTTTTrreri l?I LU I J 1 VJ ¥ 1 \J 1 SCXRZl T lulP 

ift that rang e ; 

I / 1 ,\ t~ - I I I t f \ : rul'itu ii-v i i~t ii 'ti -it i t li'fii i 1 , i 1 1 o i r . t I~, ,-t , t ^, 

i J. I i r Ljuiui r lviun ? v ttt ttttttt rr fiuuiu i in tv r"^r^TT 

ha4 the omployoo net soparatod from eef- 
vico, if it is within the salary rango for the 
class te which he is boing reinstated; the rel- 
ative salary is computed from his salary fate 
at time ef separation phis legislative ift- 
croases a»d any incroasos r e sulting from sal- 
ary range rovisions ~ sinco his s e paration; 

(e4 A salary m accordance wtth the policy e» 
Hew appointments; 

(44 A salary i» accordance with promotional 
policy rf the reinstatement is te a class at a 
higher level thaft the e»e from which the 
e mployeo separated; 

fe4 Upon reinstatement from military leave, aft 
employee's salary shall he based eft the last 
salary pies afty general salary increases 4we 
while eft leaver 44** addition ef annual sal- 
ary increases fftay he considered by the 
agency head. ff the employee was i» a 
trainee status at the time ef military leave, 
the addition ef trainee adjustments fftay he 
considered rf it eaft he determined that the 
military experience directly related te- the 
development » the area ef work te be pef- 
fonned. 

Statutory Authority G.S. 126-4. 

.1006 BENEFITS REINSTATED 

(a) Sick leave shall be reinstated when an em- 
ployee returns from authorized leave without pay- 
or when reinstated within three five years from 
any type of separation. 

(b) Employees who enter the armed services 
or who engage in active military service and who 
return to state employment within a period of 
two years after being separated or released, or 
becoming entitled to be separated or released, 
from active military service under other than dis- 
honorable conditions shall be entitled to full re- 
tirement membership service credit for the period 
of such active service in the armed services. 



Under this provision, credit is received for such 
service upon furnishing an acceptable copy of a 
military discharge to the Teachers' and State 
Employees' Retirement System. 

Statutory Authority G.S. 126-4. 

.1007 PERFORMANCE INCREASE 
ANNIVERSARY DATE 

Anniversary dates de net apply te employees 
whoso salaries ape at step three er higher. Pop 
employees whoso salaries are at step er>e er two, 
the following shall apply: 

(-44 \Vhon r e instated from r e signation, 4is- 
missal, er retirement, the increase annivor 
sapy date wth he the first day ef the month 
i» which the omployoo completes at least 
half the workdays i» a month. 

(3) When reinstated from leave without pay er 
reduction i» foreo, the anniversary date wih 
be established e» the first day ef the month 
when the employee completes 44 months in- 
pay status sinc e the last increase that estate 
lished aft anniversary date; this includes time 
beforo aft4 after the leave er break ift service. 
U the e mployee is eft leave without pay f-ep 
less thaft on e half the scheduled workdays ift 
a«y month, service credit toward the He*t 
anniversary date will he granted f-ep the 
whole month. 

(-4+ V i lion a» employee is e» military leave, 
educational leave, ep worker's compensation 
leave, the anniversary date does Fret change. 

Statutory Authority G.S. 126-4. 

.1010 SALARY RATE UPON 

REINSTATEMENT 

(a) When an employee is reinstated within one 
vear from the separation date to the same classi- 
fication level, the new salary is determined bv 
adjusting the previous salary of that individual 
bv any legislative increase or other general ad- 
liistment in level which has occurred since the 
separation. 

( 1) If the employee is reinstated to a higher 
or lower classification level, the adjusted 
previous salary becomes the basis for de- 
termining the new starting salary in ac- 
cordance with the policies on promotion 
or demotion as is appropriate. 

(2) A salary lower than allowed under Sub- 
paragraph (a)( 1 ) of this Rule may be paid; 
however a higher salary may not be paid 
unless it is justified by intervening em- 
ployment. 

(b) When an employee is reinstated after one 
year from the separation date, the new salar,' may 
be determined as outlined under Subparagraphs 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



10S5 



PROPOSED RULES 



(a)( 1) and (2) of this Rule or as a new appoint- 
ment and justified accordingly when required. 

(c) Upon reinstatement from military leave, an 
employee's salary shall be based on the last salary 

lus anv general increases due while on leave. 



The addition of performance salary increases may 
be considered by the agency head if appropriate. 
If the employee was in trainee status at the time 
of military leave, the addition of trainee adjust- 
ments may be considered if it can be determined 
that the military experience directly related to the 
development in the area of work to be per- 
formed. 

Statutory Authority G.S. 126-4. 

SUBCHAPTER IL - AFFIRMATIVE ACTION 

SECTION .0200 - ACQUIRED IMMUNE 

DEFICIENCY SYNDROME (AIDS) IN THE 

WORKPLACE 

.0201 EDUCATION AND TRAINING 

(a) All agencies and institutions of State gov- 
ernment will undertake an education and training 
program. This program will have two compo- 
nents: a basic education and training component 
for all employees and an advanced education and 
training component for employees who perform 
tasks that have a greater potential for exposure 
of the employee to the HIV virus. 

(b) Each agency and institution shall imple- 
ment a method for documenting employee at- 
tendance under either training component. This 
documentation will preserve the agency or insti- 
tution s authority to administer the Complaints 
and Discipline provision of this policy. 

Statutory Authority G.S. 126-4. 

.0202 BASIC EDUCATION AND TRAINING 
COMPONENT 

(a) To insure program consistency the Office 
of State Personnel with guidance from the Stat e 
Public Health Director, wfo identify 9* develop 
basic education an4 training programs which 
a gene ior . ate required to provide fof= aH their mb- 
ployeeo. developed and published in January, 
1991 an AIDS Education Program for NC State 
Employees Manual which agencies may use to 
provide education and training for all of their 
employees. 



each agency ef other appropriate resources 4es- 
ignated by the The agency head shall designate a 
coordinator and appropriate resources, and with 
the assistance of professional health educators, 
all employees will be offered training within three 
years from the adoption of this policy, and 
thereafter for new employees within six months 
of initial employment. Each ag e ncy ajfo institu 
tfoft is roquirod to completo a» AIDS Education 
Program Implementation Plan which includoo 
foe method fop documenting attendance. This 

t"\| r \r\ r hill r\£\ ci I ba a *** ■"*-'* * o * K.-» vioti \\I I C 17 iiffi/>i-i 

pTOTT -'IRIir C^.' "IT-llTI I1H It'll TTT 1 1 1^ 1.71T11C TT 1 IS I 7 V / 1 1 1 *-^?7 

Offico ef State Personnel top roviow top compli 
a»ee w*fo fois Piulo. 

Statutory Authority G.S. 126-4. 

.0203 SPECIALIZED EDUCATION AND 
TRAINING COMPONENT 

(a) 3foe Office &f State Personnel Agencies will 
identify training modules and resources as ap- 
proved by the State Public Health Director 
which will address the special education and 
training needs of employees who perform work 
related tasks that have a potential for exposure 
to the employee to the HIV virus. Each agency 
shall adopt these resources to their own work 
force needs. 

(b) Each agency with employees requiring 
specialized training will provide such training by 
November \-, 1991. in accordance with the 
Center for Disease Control (CDC) requirements. 
Agencies must provide training fof Hew- employ 
ees during their work orientation period. ^Pbe 
agency shall appropriately document toe em- 
ployooo' compliance with fo+s policy. 

(e) All employees shall periodically be provided 
updated general public health information issued 
by the State Public H e alth Director e* toe U.S. 
Centers fof Diseaso Control. Such educational 
literature shall be distributed as appropriate after 
further approval by foe State Personnel Director 
fo consultation with toe State WISE Director. 
Appropriate records ape to be maintained by foe 
agency as proof ©f completion ©f a»y periodic 
updat e ef employ e e education. 

Statutory Authority G.S. 126-4. 



1086 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



LIST OF RULES CODIFIED 



1 he List of Rules Codified 


is a listing of rules that were filed with OAH in the month indicated. 


Key: 

Citation = 

AD 

AM 


Title, Chapter, Subchapter and Rule(s) 

Adopt 

Amend 


RP 

With Chgs 
Eff Date 


Repeal 

Final text differs from proposed text 

Date rule becomes effective 


Temp. Expires = 


Rule was filed as a temporary rule and expires on this date 



NORTH CAROLINA ADMINISTRATIVE CODE 
SEPTEMBER 1991 



TITLE DEPARTMENT 



4 


Economic and Community 




Development 


5 


Correction 


9 


Governor 


ID 


Human Resources 


11 


Insurance 


12 


Justice 


15A 


Environment, Health, 




and Natural Resources 


16 


Public Education 



TITLE DEPARTMENT 

17 Revenue 

19A Transportation 
21 Occupational Licensing Boards 

2 - Architecture 
8 - CPA Examiners 
32 - Medical Examiners 
48 - Physical Therapy 
54 - Practicing Psychologists 
25 State Personnel 



Citation 


AD 


AM 


RP 


With 
Chgs 


Eff. 

Date 


Temp. 
Expires 


4 NCAC 16D .0801 - .0817 
Recodified to 
4 NCAC 16K. 
.0001 - .0017 










09 06 91 




.1001 - .1004 
Recodified to 
4 NCAC 16L 
.0001 - .0004 










09 06 91 




16K. .0001 - .0017 

Recodified from 
4 NCAC 16D 
.0801 - .0817 










09 06,91 




16L .0001 - .0004 

Recodified from 
4 NCAC 16D 
.1001 - .1004 










09 06 91 




5 NCAC 2A .0101 • .0103 






• 




11 01 91 




.0201 - .0202 






• 




11 01 91 




.0301 - .0303 






• 




11 01 91 





6:15 NORTH CAROLINA REGISTER November I, 1991 



1 087 



LIST OF RULES CODIFIED 



Citation 


AD 


AM 


RP 


With 

Chgs 


EfT. 
Date 


Temp. 
Expires 


5 NCAC 2A .0401 - .0402 






• 




11 01 91 




.0501 - .0510 






• 




11 01 91 




213 .0101 - .0104 




• 






11 01 91 




.0201 - .0206 




• 






11 01 91 




2C .0504 




• 






11 01 91 




2D .0301 - .0305 






• 




11 01 91 




.0306 - .0310 


• 








11 01 91 




2E .0202 - .0209 










11 01 91 




.0211 - .0220 










11 01 91 




.0222 










11 01 91 




.0224 - .0225 










11 01 91 




.0230 - .0233 










11 01 91 




.0236 - .0240 










11 01 91 




.0703 




• 






11 01 91 




.1304 - .1305 










11 01 91 




.1307 - .1309 










11 01 91 




.1501 - .1503 










11 01 91 




2F .0101 




• 






11 01 91 




.0102 






• 




11 01 91 




.0103 - .0107 


• 








1 1 01 91 




.0501 - .0503 




• 






1 1 01 91 




.0701 - .0704 










11 (11 91 




.0801 - .0X02 










11 01 91 




.0901 - .0903 










11 01 91 




.1001 - .1002 










11 01 91 




.1 101 - .1 102 










11 01 91 




.1201 - .1202 










1 1 01 91 




.1301 - .1303 










11 01 91 




.1401 - .1402 










11 01 91 




.1501 - .1502 










11 01 91 




.1503 - .1508 


• 








11 01 91 




.1601 - .1602 










11 01 91 




.1701 - .1703 










11 01 91 




.1801 - .1809 










11 01 91 




.1901 - .1907 










11 01 91 




.2401 - .2404 










11 01 91 




.2601 - .2604 


• 








11 01 91 




9 NCAC 2B Executive Order 149 










08 15 91 





1088 



6:15 NORTH CAROLINA REGISTER November I, 1991 



LIST OF RULES CODIFIED 



Citation 


AD 


AM 


RP 


With 
Chgs 


EfT. 
Date 


Temp. 
Expires 


9 NCAC 2B Executive Order 1 50 










08 21 91 




Executive Order 151 










09 11 91 




Executive Order 1 52 










09/11 91 




10 NCAC 3U .0604 








• 


11 01.91 




.0804 








• 


11 01 91 




14K .0103 








• 


11 01 91 




.0312 










11 01 91 




.0313 - .0315 








• 


11 01,91 




.0316 






• 




11 0191 




.0317 








• 


11 01 91 




.0320 








• 


11 01,91 




.0334 










11 01 91 




.0337 








• 


11 01 91 




.0348 










11 01 91 




.0349 






• 




11 01 91 




.0351 








• 


11 01 91 




.0354 








• 


11 01 91 




.0366 - .0367 






• 




11 01 91 




14E .0309 






• 




11 01 91 




.0407 




• 






11 01 91 




.0506 




• 






11 01 91 




.0507 






• 




11 01 91 




.0607 - .0608 






• 




11 01 91 




.0610 






• 




11 01 91 




.0"M0 






• 




11 01 91 




I4\l .0110 




• 






11 01 91 




.0113 




• 




• 


11 01 91 




.0206 




• 




• 


11 01 91 




.0208 






• 




11 01 91 




.0209 




• 




• 


11 01 91 




.0210 






• 




11 01 91 




.0409 - .0410 




• 




• 


11 01 91 




.0613 






• 




11 01 91 




.0616 






• 




11 01 91 




14N .0810 




• 






11 01 91 




140 .0105 -.0106 




• 






11 01 91 




.0108 - .0109 






• 




11 01 91 




.0207 






• 




11 01 91 





6:75 NORTH CAROLINA REGISTER November I, 1991 



I OS 9 



LIST OF RULES CODIFIED 



Citation 


AD 


AM 


RP 


With 
Chgs 


Eff. 
Date 


Temp. 
Expires 


10 NCAC 140 .0310 




• 




• 


11 01 91 




.040" - .0409 




• 






11 01 91 




.0410 






• 




11 01,91 




.0610 






• 




11 01 91 




.0616 






• 




11 01 91 




.0619 






• 




11 01,91 




14P .0101 - 0102 










01 01 92 




14Q .0101 - .0104 










01 01 92 




.0201 










01 01 92 




.0202 - .0203 










01 01 92 




.0204 










01 01 92 




.0301 - .0303 










01 01 92 




.0304 






• 




01 01 92 




.0305 










01 01 92 




.0306 






• 




01 01.92 




14R .0101 - .0105 










01 01 92 




.0106 






• 




01 01 92 




.0107 










01 01 92 




.0201 










01 01 92 




.0301 - .0303 






• 




01 01 92 




14S .0101 










01 01 92 




.0104 - .0106 










01 01 92 




181 .0120 










11 01 91 




ISL .0433 - .0434 










01 01 92 




.0505 - .0510 






• 




11 01 91 




.0512 






• 




11 01 91 




.0603 








• 


11 01 91 




.0701 - .0"02 










11 01 91 




.0706 






• 




11 01 91 




.0802 






• 




1 1 01 91 




.0806 








• 


11 01 91 




.1102 








• 


11 01 91 




.1104 






• 




11 01 91 




.1502 








• 


11 01 91 




.1507 










11 01 91 




L8M .0308 






• 




11 01 91 




.0704 




• 




• 


11 01 91 




.0707 






• 




11 01 91 





1090 



6:15 NORTH CAROLINA REGISTER November I, 1991 



LIST OF RULES CODIFIED 



Citation 


AD 


AM 


RP 


With 
Chgs 


EfT. 
Date 


Temp. 
Expires 


10 NCAC 18M .0710 










11 01 91 




.0818 










11/01/91 




.1105 










11 01,91 




.1403 










11 01 91 




.1405 










11 01 91 




18N .0212 










11 01 91 




.0307 






• 




11 01 91 




180 .0520 -.0521 










11 01 91 




.0523 










11 01 91 




18P .0903 










11 01,91 




18Q .0541 










1 101.91 




.0713 






• 




01 01 92 




.0808 - .0809 




• 




• 


11 01 91 




.0812 






• 




01 01 92 




22K .0101 










11 01 91 




.0201 - .0204 










11 01 41 




22L .0101 










11 01 91 




.0201 - .0204 










11 01 91 




22M .0201 - .0202 










11 01 91 




.0205 - .0206 










11 01 91 




22N .0201 - .0204 










11 01 91 




.0206 - .0207 










11 01 91 




.0209 - .0212 










11 01 91 




26H .0106 




• 




• 


11 01 91 




11 NCAC 11C .0130 


• 








09 12 41 


03 10 92 


12 NCAC 4 A .0101 










11 01 91 




.0104 - .0105 










11 01 91 




.0306 - .0308 










11 01 91 




4B .0101 - .0105 










11 01 91 




.0201 - .0202 










11 01,91 




.0204 - .0207 










11 01 91 




4C .0101 - .0106 










11 01 91 




.0201 - .0203 










11 01 91 




.0205 - .0210 










11 01/91 




4E .0101 


• 






• 


11 01 91 




.0102 


• 








11 01 91 




.0103 - .0106 


• 






• 


11 01 91 




.0201 - .0202 


• 








11 01 91 





6:15 NORTH CAROLINA REGISTER November I, 1991 



1091 



LIST OF RULES CODIFIED 



Citation 


AD 


AVI 


RP 


With 

Chgs 


EfT. 
Date 


Temp. 
Expires 


12 NCAC 4li .0203 










11 01 91 




.0301 - .0305 










11 01,91 




.0401 - .0402 










11 01 91 




.0403 










11 01 91 




4F .0101 - .0102 










11 01 91 




.0201 










11 01 91 




.0202 - .0203 










11 01 91 




.0301 










11 01 91 




.0302 - .0303 










11 01 91 




.04(11 










11 01 91 




.0402 - .0403 










11 01 91 




.0404 - .0405 










11 01 91 




.0406 - .0407 










11 01 91 




.0408 










11 01 91 




.0501 










11 01 91 




.0502 










11 01 91 




.0601 










11 01 91 




.0701 










11 01 91 




.0801 










11 01 91 




4G .0101 










11 01 91 




.0102 










11 01 91 




.0201 










11 01 91 




.0301 










11 01 91 




ID .0807 










11 01 91 




.0809 










11 01 91 




.090 1 










11 01 91 




ISA NCAC 31 .0001 










11 01.91 




.0004 










11 01 91 




7H .0206 










11 01 91 




7J .0204 










11 01.91 




.0602 










11 01 91 




9C .1007 


• 






• 


11 01 91 




10A .1001 








• 


11 01 91 




IOC .0107 










11 01 91 




.0305 










11 01 91 




10D .0002 








• 


11 01 91 




101 .0003 - .0005 










11 01 91 




1 3A .0003 










11 01 91 





1092 



6:15 NORTH CAROLINA REGISTER November I, 1 99 1 



LIST OF RULES CODIFIED 



Citation 


AD 


AM 


RP 


With 

Chgs 


Eff. 
Date 


Temp. 
Expires 


15A NCAC 18A .2804 




• 






01 01 92 




.2833 




• 






01 01,92 




16 NCAC 6B .0002 




• 






11 01,91 




17 NCAC 1C .0323 


• 








11 01 91 




4D .0908 




• 






11 01 91 




5B .0104 




• 






11 01 91 




5C .0908 


• 








11 01 91 




.2101 - .2102 




• 






11 01 91 




.2601 


• 








11 01 91 




8 .0504 




• 






11 01 91 




19A NCAC 1A .0204 - .0206 










11 01 91 




.0404 










11 01 91 




.0406 - .0408 










11 01 91 




.0501 - .0508 










11 01 91 




.0601 - .0611 










11 01 91 




.0701 










11 01 91 




.0703 










11 01 91 




.0705 - .071 1 










11 01 91 




.0901 - .0902 










11 01 91 




2 A .0102 










11 01 91 




.0202 






• 




11 01 91 




2B .0102 










11 01 91 




.0104 










11 01 91 




.0107 - .0108 










11 01 91 




.0109 






• 




11 01 91 




.0111 






• 




11 01 91 




.0114 










11 01 9] 




.0121 










11 01 91 




.0122 






• 




1 1 ()1 91 




.0123 










11 01 91 




.0129 










11 01 91 




.0134 










11 01 91 




.0136 










11 01 91 




.0138 - .0139 










] 1 (11 91 




.0145 










11 01 91 




.0151 










11 01 91 




.0158 










11 01 91 




.0164 - .0165 


• 








11 01 91 





6:15 NORTH CAROLINA REGISTER November 1, 1991 



1093 



LIST OF RULES CODIFIED 



Citation 


AD 


AM 


RP 


With 
Chgs 


Eff. 
Date 


Temp. 
Expires 


19A NCAC 2B .0202 - .0203 




• 






11 01 91 




.0235 






• 




11 01 91 




.0306 




• 






11 01 91 




.0313 




• 






11 01 91 




.0401 - .0431 






• 




11 01 91 




.0441 - .0466 


• 








11 01 91 




.0503 




• 






11 01 91 




.0515 


• 








11 01.91 




2C .0105 




• 






11 01 91 




.0110 




• 






11 01 91 




.0112 




• 






11 01 91 




.0114 - .0115 


• 








11 01 91 




2D .0401 






• 




11 01 91 




.0407 






• 




11 01 91 




.0410 










11 01 91 




.0416 






• 




11 01 91 




.0417 










11 01 91 




.0426 - .0429 


• 








11 01 91 




.0501 










11 01 91 




.0503 










11 01 91 




.0509 










11 01 91 




.0519 - .0520 










11 01 91 




.0524 - .0525 










11 01 91 




.0532 










11 01 91 




.0538 - .0539 










11 01 91 




.0801 










11 01 91 




.0803 










11 01 91 




.0808 081 1 










11 01 91 




.0813 - .0824 










11 01 91 




.0826 






• 




11 01 91 




.0828 - .0829 


• 








11 01 91 




.0902 






• 




11 01 91 




.1001 - .1008 


• 








11 01 91 




2E .0213 




• 






11 01 91 




.0421 




• 






11 01 91 




.0424 - .0425 






• 




11 01 91 




.0426 


• 








11 01 91 




.0602 .0604 




• 






11 01 91 





1094 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



LIST OF RULES CODIFIED 



Citation 


AD 


AM 


RP 


With 
Chgs 


EfT. 
Date 


Temp. 
Expires 


19A NCAC 3A .0101 




• 






11 01 91 




.0201 - .0218 






• 




11/01/91 




3B .0103 






> 




11,01/91 




.0119 










11 01 91 




.0301 










11 01/91 




.0403 










11 01 91 




.0601 










11 01:91 




3C .0102 










11 01/91 




.0202 










11 01/91 




.0224 










11 01 91 




.0232 










11 01 91 




.0236 










11 01 91 




.0303 - .0304 










11 01 91 




.0417 






• 




11 01 91 




.0427 




• 






11 01,91 




.0436 


• 








11/01/91 




.0601 - .0603 






• 




11 01 91 




3D .0603 






• 




11 01 91 




.0701 - .0703 










11 01 91 




.0801 










11 01 91 




.0804 










11 01,91 




.0808 • .0809 










11 01 91 




.0815 










11 01 91 




.0817 










11 01 91 




.0823 - .0824 










11 0191 




.0827 






• 




11 01 91 




3E .0302 - .0304 










11 01 91 




.0401 










11 01 91 




.0402 






• 




11 01 91 




.0403 


• 








11 01 91 




3F .0101 




• 






11 01/91 




.0102 






• 




11 01 91 




.0201 - .0203 




• 






11 01 91 




.0301 






• 




11 01,91 




.0601 - .0602 


• 








11 01 91 




3G .0101 




• 






11 01 91 




.0301 




• 






11 01 91 




.0401 • .0402 




• 






11 01 91 





6:15 NORTH CAROLINA REGISTER November 1, 1991 



1095 



LIST OF RULES CODIFIED 



Citation 


AD 


AM 


RP 


With 
Chgs 


Eff. 
Date 


Temp. 
Expires 


19A NCAC 3G .0601 




• 






11 01 91 




3H .0101 - .0102 




• 






11 01 91 




.0201 




• 






11 01,91 




.0202 - .0203 






• 




11 01 91 




.0205 




• 






11 01 91 




.0206 






• 




11 01,91 




.0207 - .0208 




• 






11 01,91 




.0209 - .0210 






• 




11 01,91 




.0211 




• 






11 01 91 




.0301 - .0303 




• 






11 01/91 




.0401 - .0404 




• 






11 01 91 




.0501 - .0502 






• 




11 01 91 




.0504 






• 




11 01 91 




31 .0302 - .0303 




• 






11 01 •■) 1 




.0307 




• 






11 01 91 




.0501 




• 






11 01 91 




5A .0002 




• 






11 01 91 




5B .0101 




• 






11 01 91 




.0105 




• 






11 01 91 




.0201 - .0202 




• 






11 01 91 




.0205 - .0206 






• 




11 01 91 




.0301 




• 






11 01 91 




.0302 - .0303 






• 




11 01 91 




.0501 




• 






11 01 91 




.0502 - .0503 






• 




11 01 91 




6B .0102 - .0103 






• 




11 01 91 




.0203 - .0204 




• 






11 01 91 




.0205 


• 








11 01 91 




.0302 - .0304 




• 






11 01 91 




6C .0107 




• 






11 01 91 




.0109 - .01 10 




• 






11 01 91 




.0112 




• 






11 01 91 




.0123 - .0134 


• 








11 01 91 




.0703 - .0706 


• 








11 01 91 




21 NCAC 2 .0217 


• 






• 


11 01 91 




.0601 




• 




• 


11 01 91 




8G .0313 


• 








09 25 91 


03 22 92 


321 .0003 




• 






11 01 91 





1096 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



LIST OF RULES CODIFIED 



Citation 


AD 


AM 


RP 


With 
Chgs 


Eff. 
Date 


Temp. 
Expires 


21 NCAC 48A .0005 










11 01 91 




48B .0002 










11,01 91 




48D .0005 










11/01 91 




48E .0110 










11 01 91 




48F .0002 










11 01 91 




54 .1701 








• 


11 01 91 




.2103 








• 


11/01 91 




25 NCAC IB .0432 










11 01 91 




1C .0405 








• 


11,01 91 




.0407 








• 


11 01 91 





6:15 NORTH CAROLINA REGISTER November 1, 1991 



1097 



ARRC OBJECTIONS 



1 he Administrative Rules Review Commission (ARRC) objected to the following rules in accordance 
with G.S. !43B-30.2(c). State agencies are required to respond to ARRC as provided in G.S. 
I43B-30.2(d). 



Te 



mporary Rules are noted by 



These Rules have already gone into effect. 



ECONOMIC AND COMMUNITY DEVELOPMENT 

Employment and Training 

* 4 XCAC 20 B .0903 - Allocation of Grants 
Xo Response from Agency 

* 4 XCAC 20B .0905 - Eligibility 
Xo Response from Agency 

* 4 XCAC 20B .0907 - Cost Limitations! Categories 
Xo Response from Agency 

* 4 XCAC 20 B .0908 - Reporting 
Xo Response from Agency 

* 4 XCAC 20B .0909 - Performance Standards 
Xo Response from Agency 

* 4 XCAC 20B .09 J 1 - Tund Availability 
Xo Response from Agency 

EDUCATION 

Elementary and Secondary Education 

16 XCAC 6B .0001 - School Bus Drivers 

16 XCAC 6D .0103 - Graduation Requirements 

* 16 XCAC 6E .0301 - Driver Training 
Agency Responded 

ENVIRONMENT, HEALTH, AND NATURAL RESOURCES 

Adult Health 

ISA XCAC 16 A .0804 - Financial Eligibility 

Xo Response from Agency 

Agency Responded 

Xo Response from Agency 
ISA XCAC 16 A .0806 - Billing the HIV Health Services Program 

Xo Response from Agency 

Agency Responded 

Xo Response from Agency 

Coastal Management 

ISA XCAC 7 J .0301 - Who is Entitled to a Contested Case Hearing 
ISA XCAC 7 J .0302 - Petition for Contested Case Hearing 

Environmental Management 



ARRC Objection 
ARRC Objection 
ARRC Objection 
ARRC Objection 
ARRC Objection 
ARRC Objection 



8/22/91 
9/19/91 
8/22/91 
9/19/91 
8122/91 
9/19/91 
8/22/91 
9/19/91 
8/22/91 
9/19/91 
8/22/91 
9/ 19/91 



ARRC Objection 9/19/91 

ARRC Objection 9/19/91 

ARRC Objection 8122/91 

9/19/91 



ARRC Objection 


1/18/91 




2/25/91 


Xo Action 


3/21/91 


Xo Action 


4/18/91 


ARRC Objection 


1/18/91 




2/25/91 


Xo Action 


3/21/91 


Xo Action 


4/18/91 



ARRC Objection 9/19/91 
ARRC Objection 9/19/91 



ISA XCAC 2D .1102 - Applicability 



ARRC Objection 8/22/91 
Xo Action 9/19/91 



1098 



6:15 NORTH CAROLINA REGISTER November I, 1991 



ARRC OBJECTIONS 



ISA NCAC 2D .J 203 - Test Methods and Procedures 

Agency Revised Rule 
15A NCA C 2D . 1208 - Operator Training Requirements 

ISA NCAC 2D .1209 - Compliance Schedules 
Agency Revised Rule 

Forest Resources 

ISA NCAC 9C .1007 - America the Beautiful Grant Program 
Agency Revised Rule 

Wildlife 

ISA NCAC 10 A .1001 - Particular Offenses 

Agency Revised Rule 
ISA NCAC I OK .000/ - Course Requirements 

Agency Revised Rule 

HUMAN RESOURCES 

Aging 

10 NCAC 22M .0101 - Scope of Care Management 

10 NCAC 22M .0102 - Definitions 

10 NCAC 22M .0103 - Target Population 

10 NCAC 22M .0203 - Assessment and Reassessment 

10 NCAC 22M .0204 - Care Planning 

10 NCAC 22N .0101 - Definitions for Confidentiality of Client Data 

10 NCAC 22N .0205 - Security of Records 

10 NCAC 22N .0208 - Client Access to Records 

Children's Services 

10 NCAC 411 .0406 - Responsibility for Training of Team Members 
Pending Correction 

Economic Opportunity 

* 10 NCAC 5 IF .0/02 - Definitions 
No Response from Agency 

* 10 NCAC 5 IF .0202 - Ineligible Activities 
No Response from Agency 

* 10 NCAC 5 IF .0402 - Eligibility Requirements 
No Response from Agency 

* 10 NCAC S1F .0501 - Grant Agreement 
No Response from Agency 

Facility Services 

10 NCAC 3U .0604 - General Safety Requirements 

Agency Revised Rules 
10 NCAC 3U .0804 - Infectious and Contagious Diseases 

Agency Revised Rules 

Individual and Family Support 



ARRC Objection 8/22/91 

Obj. Removed 8/22/91 

ARRC Objection 8/22/91 

No Action 9/19/91 

ARRC Objection 8/22/91 

Obj. Removed 8/22/91 



ARRC Objection 9/19/91 
Obj. Removed 9/19/91 



ARRC Objection 9/19/91 

Obj. Removed 9/19/91 

ARRC Objection 7/18/91 

Obj. Removed 8/22/91 



ARRC 
ARRC 
ARRC 
ARRC 
ARRC 
ARRC 
ARRC 
ARRC 



Objection 
Objection 
Objection 
Objection 
Objection 
Objection 
Objection 
Objection 



9/19/91 
9/19/91 
9/19/91 
9/19/91 
9/19/91 
9/19/91 
9/19/91 
9/19/91 



ARRC Objection 7/18/91 
8/22/91 



ARRC Objection 
ARRC Objection 
ARRC Objection 
ARRC Objection 



8/22/91 
9/19/91 
8/22/91 
9/19/91 
8/22/91 
9/19/91 
8/22/91 
9/19/91 



ARRC Objection 8/22/91 

Obj. Removed 9/19/9/ 

ARRC Objection 8/22/91 

Obj. Removed 9/19/91 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1099 



ARRC OBJECTIONS 



10 NCAC42B .1201 - Personnel Requirements 

No Response from Agency 

Agency Returned Rule Unchanged 

Agency Filed Rule with OA H 
JO NCAC 42C .2001 - Qualifications of Administrator 

No Response from Agency 

Agency Returned Rule Unchanged 

Agency Filed Rule with OAH 
10 NCAC 42C .2002 - Qualifications of Supervisor-in-Charge ' 

No Response from Agency 

Agency Returned Rule Unchanged 

Agency Filed Rule with OAH 
JO NCAC 42C .2006 - Qualifications of Activities Coordinator 

No Response from Agency 

Agency Returned Rule Unchanged 

Agency Filed Rule with OA H 

Medical Assistance 



ARRC Objection 


1/18/91 




2/25/91 


No Action 


3/21/91 


Rule Effi 


8/01/91 


ARRC Objection 


1/18/91 




2/25/91 


No A ction 


3/21/9/ 


Rule Effi 


8/01/91 


ARRC Objection 


1/18/91 




2/25/91 


No Action 


3/21/91 


Rule Effi 


8/01/91 


ARRC Objection 


1/18/91 




2/25/91 


No A ction 


3/21/91 


Rule Effi 


8/01/91 



10 NCAC SOB .0305 - Deprivation 
Agency Revised Rule 



ARRC Objection 8/22/91 
Obj. Removed 8/22/91 



Mental Health: General 

10 NCAC 14K .0103 - Definitions 

Agency Revised Rule 
10 NCAC 14K .0320 - Incident Reporting 

Agency Revised Rule 
10 NCAC 14K .0337 - Emergency Care Permission 

Agency Revised Rule 
10 NCAC I4K .0351 - Administration of Medication 

Agency Revised Rule 
10 NCAC 14M .0206 - Day Services 

Agency Revised Rule 
10 NCAC 14M .0209 - Community Resources 

Agency Revised Rule 
10 NCAC 14M .0409 - Community Resources 

Agency Revised Rule 
10 NCAC 140 .03/0 - Provision of Appropriate Activities 

Agency Revised Rule 
10 NCAC 14P .0/01 - Scope 

Agency Revised Rule 
10 NCAC 14P .0/02 - Definitions 

Agency Revised Rule 
10 NCAC 14Q .0101 - Policy/ Rights Restrictions/ Interventions 

Agency Revised Rule 
10 NCAC 14R .0/04 - Seclusion; Restraint! Isolation Time Out 

Agency Revised Rule 
10 NCAC J4R .0/05 - Protective Devices 

Agency Revised Rule 
10 NCAC 14S .0/02 - Communication Rights 
10 NCAC 14S .0103 - Living Environment 



ARRC Objection 
Obj. Removed 
ARRC Objection 
Obj. Removed 
ARRC Objection 
Obj. Removed 
ARRC Objection 
Obj. Removed 
ARRC Objection 
Obj. Removed 
ARRC Objection 
Obj. Removed 
ARRC Objection 
Obj. Removed 
ARRC Objection 
Obj. Removed 
ARRC Objection 
Obj. Removed 
ARRC Objection 
Obj. Removed 
ARRC Objection 
Obj. Removed 
ARRC Objection 
Obj. Removed 
ARRC Objection 
Obj. Removed 
ARRC Objection 
ARRC Objection 



9/19/91 
9! 19/91 

9/19/91 
9119191 
9/19/91 
9/19/91 
9/19/91 
9/19,191 
9:19/91 
9/19/9/ 
9/19/9/ 
9/19/9/ 
9/19/91 
9/19/91 
9119/91 
9 1 19/91 
9119/91 
9/19/91 
9/19/91 
9/19/91 
9119/91 
9/19/91 
9/19191 
9/19/91 
91/9/91 
9/19/91 
9/19/91 
9/19/91 



Mental Health: Other Programs 



1100 



6:15 NORTH CAROLINA REGISTER November 1, 1 99 1 



ARRC OBJECTIONS 



10 NCAC 18L .0603 - Svc Purpose/ Eligibility Requirements 

Agency Revised Rule 
JO NCAC 18M .0704 - Staff Requirements 

Agency Revised Rule 
10 NCAC 18Q .0809 - Agreement Between Resident and Program 

Agency Revised Rule 

INSURANCE 

Engineering and Building Codes 

// NCAC 8 .0815 - Final Board Order 

Agency Revised Rule 

JUSTICE 

Criminal Information 



ARRC Objection 9/19/91 

Obj. Removed 9/19/91 

ARRC Objection 9/19/91 

Obj. Removed 9/19/91 

ARRC Objection 9/19/91 

Obj. Removed 9/19/91 



ARRC Objection 7/18:91 
Obj. Removed 8/22/91 



12 NCAC 

Agency 
12 NCAC 

Agency 
12 NCAC 

Agency 
12 NCAC 

Agency 
12 NCAC 

Agency 
12 NCAC 

Agency 
12 NCAC 

Agency 
12 NCAC 

Agency 
12 NCAC 

Agency 
12 NCAC 

Agency 
12 NCAC 

Agency 
12 NCAC 

Agency 
12 NCAC 

Agency 
12 NCAC 

Agency 

12 NCAC 

Agency 

12 NCAC 
Agency 



4E .0103 - Advisory Policy Board 

Revised Rule 

4E .0104 - Definitions 

Revised Rule 

4E .0106 - Manuals 

Revised Rule 

4E .0203 - Non-Terminal Access 

Revised Rule 

4E .0301 - User Agreement 

Revised Rule 

4E .0302 - User Access Fee Agreement 

Revised Rule 

4E .0401 - DC! Terminal Operator 

Revised Rule 

4E .0403 - Suspension/ Revocation of Operator Certification 

Revised Rule 

4F .0203 - Hit Confirmation 

Revised Rule 

4F .0301 - Arrest Fingerprint Card 

Revised Rule 

4F .0404 - Ind's Right/ Review/ His/ Her/Crim History Record 

Revised Rule 

4F .0405 - Use/ CCH/ Lie/ Non-Criminal Justice Emp Purposes 

Revised Rule 

4F .0501 - Expungements 

Revised Rule 

4G .0102 - Penalty Provisions 

Revised Rule 

4G .0201 - Notice of Violation 
Revised Rule 

4G .0301 - Informal Hearing Procedure 
Revised Rule 



ARRC Objection 9/19/91 

Obj. Removed 9/19/91 

ARRC Objection 9/19/91 

Obj. Removed 9/19/91 

ARRC Objection 9/19/91 

Obj. Removed 9; 19/91 

ARRC Objection 9/ 19 :91 

Obj. Removed 9/19/91 

ARRC Objection 9/19/91 

Obj. Removed 9/19,91 

ARRC Objection 9/19/91 

Obj. Removed 9/19/91 

ARRC Objection 9/19/91 

Obj. Removed 9:19/91 

ARRC Objection 9/19/91 

Obj. Removed 9/19/91 

ARRC Objection 9/19/91 

Obj. Removed 9/19/91 

ARRC Objection 9/19/91 

Obj. Removed 9/19/91 

ARRC Objection 9/19/91 

Obj. Removed 9/19/91 

ARRC Objection 9:19/91 

Obj. Removed 9,19/91 

ARRC Objection 9j 19/91 

Obj. Removed 9/19/91 

ARRC Objection 9/19/91 

Obj. Removed 9,19:91 

ARRC Objection 9/19,91 

Obj. Removed 9,19,91 

ARRC Objection 9/19:91 

Obj. Removed 9/19:91 



LICENSING BOARDS AND COMMISSIONS 

Architecture 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1101 



ARRC OBJECTIONS 



21 NCAC 2 .0601 - Committee on Investigations 
Agency Revised Rule 

Cosmetic Art Examiners 

21 NCAC 14F .0010 - Sanitary Rules 
No Response from Agency 
Agency Requested Additional Time 
Agency Responded Will Repeal Rule 

Practicing Psychologists 

21 NCAC 54 .1701 - Information Required 

Agency Revised Rule 
21 NCAC 54 .1704 - Review Procedure 

Agency Revised Rule 
21 NCAC 54 .2103 - Reinstatement 

Agency Revised Rule 



ARRC Objection 9/19/91 
Obj. Removed 9/19/91 



ARRC Objection 5/16/91 

No Action 7/18/91 

7/18/91 

Obj. Removed 8/22/91 



ARRC Objection 8/22/91 

Obj. Removed 9/19/91 

ARRC Objection 8/22/91 

Obj. Removed 8/22/91 

ARRC Objection 8/22/91 

Obj. Removed 9/19/91 



1102 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



RULES INVALID A TED BY JUDICIAL DECISION 



1 his Section of the Register lists the recent decisions issued by the North Carolina Supreme Court, 
Court of Appeals, Superior Court (when available), and the Office of Administrative Hearings which 
invalidate a rule in the North Carolina Administrative Code. 



15 A NCAC 2 ID .0802(b)(2) -AVAILABILITY 

Robert Roosevelt Reilly Jr., Administrative Law Judge with the Office of Administrative Hearings, de- 
clared Rule 15A NCAC 21D .0802(b)(2) void as applied in Wilson's Supermarket #12, Petitioner v. De- 
partment of Environment, Health, and Natural Resources, Respondent (91 EHR 0795). 



6:15 NORTH CAROLINA REGISTER November 1, 1991 1103 



NOR TH CAROLINA ADMINISTRA TIVE CODE CLASSIFICA TION SYSTEM 



The North Carolina Administrative Code (NCACj has four major subdivisions of rules. Two 
of these, titles and chapters, are mandatory. The major subdivision of the NCAC is the title. 
Each major department in the North Carolina executive branch of government has been as- 
signed a title number. Titles are further broken down into chapters which shall be numerical 
in order. The other two, subchapters and sections are optional subdivisions to be used by- 
agencies when appropriate. 

TITLE/MAJOR DIVISIONS OF THE NORTH CAROLINA ADMINISTRATIVE CODE 



ITLE 


DEPARTMENT 


LICENSING BOARDS CE 


[APTER 


1 


Administration 


Architecture 


2 


2 


Agriculture 


Auctioneers 


4 


3 


Auditor 


Barber Examiners 


6 


4 


Economic and Community 


Certified Public Accountant Examiners 


8 




Development 


Chiropractic Examiners 


10 


5 


Correction 


General Contractors 


12 


6 


Council of State 


Cosmetic Art Examiners 


14 


7 


Cultural Resources 


Dental Examiners 


16 


s 


Elections 


Electrical Contractors 


18 


9 


Governor 


Foresters 


20 


10 


Human Resources 


Geologists 


21 


11 


Insurance 


Hearing Aid Dealers and Fitters 


22 


12 


Justice 


Landscape Architects 


26 


13 


Labor 


Landscape Contractors 


28 


14A 


Crime Control and Public Safety 


Marital & Family Therapy 


31 


15A 


Environment, Health, and Natural 


Medical Examiners 


32 




Resources 


Midwifery Joint Committee 


33 


lf< 


Public Education 


Mortuary Science 


34 


r 


Revenue 


Nursing 


36 


18 


Secretary of State 


Nursing Home Administrators 


37 


19A 


Transportation 


Occupational Therapists 


38 


20 


Treasurer 


Opticians 


40 


■21 


Occupational Licensing Boards 


Optometry 


42 


:: 


Administrative Procedures 


Osteopathic Examination and 


44 


23 


Community Colleges 


Registration (Repealed) 




24 


Independent Agencies 


Pharmacy 


46 


25 


State Personnel 


Physical Therapy Examiners 


48 


26 


Administrative I learings 


Plumbing, Heating and Fire Sprinkler 
Contractors 


50 






Podiatry Examiners 


52 






Practicing Counselors 


53 






Practicing Psychologists 


54 






Professional Engineers and Land Surveyor; 


56 






Real Estate Commission 


58 






Refrigeration Examiners 


60 






Sanitarian Examiners 


62 






Social Work 


63 






Speech and Language Pathologists and 


64 






Audiologists 








Veterinary Medical Board 


66 



Note: Title 21 contains the chapters of the various occupational licensing boards. 



11 04 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



CUMULA TIVE INDEX 



CUMULA TIVE INDEX 

(April 1991 - March 1992) 



1991 - 1992 



Pages 



Issue 



1 - 44 1 - April 

44 - 99 2 - April 

100 - 185 3 - May 

186 - 226 4 - May 

227 - 246 5 - June 

247 - 325 6 - June 

326 - 373 7 - July 

374 - 463 8 - July 

464 - 515 9 - August 

516 - 677 10 - August 

678 - 721 11 - September 

722 - 783 12 - September 

784 - 923 13 - September 

924 - 980 14 - October 

981 - 1107 15 - November 



AO - Administrative Order 

AG - Attorney General's Opinions 

C - Correction 

FR - Final Rule 

GS - General Statute 

JO - Judicial Orders or Decision 

M - Miscellaneous 

NP - Notice of Petitions 

PR - Proposed Rule 

SO - Statements of Organization 

FR - Temporary' Rule 



ADMINISTRATION 

State Construction, 465 PR 

State Fmployees Combined Campaign, 924 PR 

ADMINISTRATIVE HEARINGS 

Hearings Division, 310 PR 
Rules Division, 665 PR 

ADMINISTRATIVE ORDER 

Administrative Order, 926 AO 

AGRICULTURE 

Food and Drug Protection Division, 576 PR, 725 PR 

Markets, 576 PR 

North Carolina State Fair, 576 PR 

Pesticide Board, 725 PR 



6:15 NORTH CAROLINA REGISTER November 1, 1991 



1105 



CUMULA TIVE INDEX 



Plant Industry, 102 PR, 469 PR, 576 PR 

CORRECTION 

Division of Prisons, 35 FR, 87 FR, 209 FR, 700 FR, 938 FR 

CRIME CONTROL AND PUBLIC SAFETY 

State Highway Patrol, Division of, 809 PR 

CULTURAL RESOURCES 

Archives and History, 932 PR 
State Library, 686 PR 

ECONOMIC AND COMMUNITY DEVELOPMENT 

Alcoholic Beverage Control Commission, 4 PR 

Community Assistance, 104 PR 

Credit Union Division, 231 PR, 683 PR 

Employment and Training, 590 PR 

Savings Institutions Division, 984 PR 

ENVIRONMENT, HEALTH, AND NATURAL RESOURCES 

Coastal Management, 299 PR 

Environmental Management, 197 PR, 271 PR, 447 PR. 1061 PR 

Forest Resources, 300 PR 

Health: Epidemiology, 28 PR, 341 PR, 735 PR 

Health Services, 9 PR, 327 PR, 727 PR, 815 PR 

Land Resources, 494 PR, 810 PR 

Marine Fisheries, 122 PR, 690 PR 

Parks and Recreation, 693 PR 

State Registrar, 734 PR 

Water Treatment Facilitv Operators, 495 PR 

Wildlife Resources Commission, 84 PR, 170 PR, 198 PR, 301 PR, 647 PR, 692 PR, 1062 PR 

FINAL DECISION LETTERS 

Voting Rights Act, 48, 230, 248, 326, 464, 516, 681, 722, 806, 927 

GENERAL STATUTES 

Chapter 150B, 784 GS 

GOVERNOR/LT. GOVERNOR 

Executive Orders. 1, 45, 100, 186, 227, 247, 374, 678, 804, 924, 981 

HUMAN RESOURCES 

Aging, Division of, 72 PR, 422 PR 

Blind". Services for. 686 PR 

Economic Opportunity, 604 PR, 689 PR 

Facility Sen-ices, 104 PR, 471 PR, 592 PR, 1035 PR 

Medical Assistance, 9 PR, 112 PR, 188 PR, 232 PR, 250 PR, 430 PR, 492 PR, 601 PR, 688 PR, 

726 PR, S07 PR. 932 PR, 1036 PR 
Mental Health, Developmental Disabilities and Substance Abuse Services, 5 PR, 49 PR, 375 PR, 

449 FR 
Social Services, 116 PR, 1039 PR 

INDEPENDENT AGENCIES 

Safety and Health Review Board of North Carolina. 1069 PR 

INSURANCE 

Actuarial Services Division, 119 PR, 1060 PR 
Agent Services Division, 1056 PR 
Financial Evaluation Division. 933 PR 



1106 6:15 NORTH CAROLINA REGISTER November 1, 1991 



CUMULA TIVE INDEX 



Life and Health Division, 430 PR 
Special Services Division, 84 PR 

JUSTICE 

Criminal Justice Education and Training Standards, 607 PR 
Private Protective Services, 121 PR 
Sheriffs' Standards Division, 618 PR 
State Bureau of Investigation, 250 PR 

LICENSING BOARDS 

Architecture, Board of, 30 PR, 232 PR 

Certified Public Accountant Examiners, 201 PR, 935 PR 

Cosmetic Art Examiners, 653 PR, 1066 PR 

Electrolysis Examiners, Board of, 737 PR 

Geologists, Board of, 654 PR 

Hearing .Aid Dealers and Fitters, 496 PR, 655 PR 

Landscape Contractors' Registration Board, 665 PR 

Medical Examiners, Board of, 304 PR, 363 PR, 935 PR 

Nursing, Board of, 305 PR 

Optometry', Board of Examiners, 1068 PR 

Pharmacy, Board of, 201 PR 

Physical Therapy Examiners, Board of, 33 PR, 363 PR 

Practicing Psychologists Examiners, 203 PR 

Professional Engineers and Land Surveyors, 497 PR 

Real Estate Commission, 171 PR, 500 PR 

LIST OF RULES CODIFIED 

List of Rules Codified, 89, 215, 314, 451, 504, 711, 907, 1087 

PUBLIC EDUCATION 

Elementary and Secondary, 29 PR, 199 PR, 303 PR, 694 PR 

REVENUE 

Corporate Income and Franchise Tax Division, 816 FR 

Departmental Rules, 968 FR 

Individual Income, Inheritance and Gift Tax Division, 739 FR 

Individual Income Tax Division, 234 FR, 747 FR 

Intangibles Tax Division, 766 FR, 969 FR 

License and Excise Tax Division, 740 FR, 969 FR 

Motor Fuels Tax Division, 768 FR 

Property Tax Commission, 210 FR 

Sales and Use Tax, 817 FR 

SECRETARY OF STATE 

Securities Division, 85 PR 

STATE PERSONNEL 

Office of State Personnel, 696 PR, 1082 PR 
State Personnel Commission, 172 PR, 364 PR 

STATE TREASURER 

Retirement Systems, 736 PR 

STATEMENTS OF ORGANIZATION 

Statements of Organization, 518 SO 

TRANSPORTATION 

Division of Motor Vehicles, 213 FR, 502 FR, 701 FR, 773 FR 



6:15 NORTH CAROLINA REGISTER November 1, 1991 1107 



NORTH CAROLINA ADMINISTRATIVE CODE 

The full publication consists of 53 volumes, totaling in excess of 15,000 pages. It is supplemented monthly 
with replacement pages. A one year subscription to the full publication including supplements can be 
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1 




2 




3 




4 




5 




6 




7 




8 




9 




10 




11 




12 




13 




14 




15 




16 




17 




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